DIGILAND INTERNATIONAL LIMITED

Transcription

DOCUMENT DATED 15 JANUARY 2002
We have issued this Document in connection with the listing of Digiland International Limited (our
``Company'') on the Singapore Exchange Securities Trading Limited (the ``SGX-ST'') by way of an
introduction (the `Ìntroduction''). In this Document, we provide information on our Company, our
subsidiaries and associated companies and our ordinary shares of par value S$0.15 each (``Shares'')
in compliance with the SGX-ST's listing requirements.
We have received the in-principle approval of the SGX-ST for the listing of all our issued shares as
well as the new shares which may be issued pursuant to the exercise of options to be granted under
the Plan (as de®ned herein) on the Main Board of the SGX-ST. The SGX-ST assumes no responsibility
for any statements made, opinions expressed or reports contained in this Document. You should not
take the listing as an indication of the merits of the Introduction, our Company, our subsidiaries and
associated companies or our Shares.
There is no offering of any of our Shares in connection with the Introduction in Singapore or elsewhere
and you should not take the Introduction or this Document to be an offer of, or an invitation to
purchase, any of our Shares. This Document is not a prospectus under Singapore law and we have
not ®led this Document with the Registrar of Companies and Businesses in Singapore.
INTRODUCTION OF
TO THE MAIN BOARD OF
THE SINGAPORE EXCHANGE SECURITIES TRADING LIMITED
Sponsored by
TABLE OF CONTENTS
Page
Corporate Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2
De®nitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3
Glossary of Technical Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6
Listing on the SGX-ST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8
Demerger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9
Document Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16
Dividend Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
24
Capitalisation and Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
25
Summary Proforma Consolidated Financial Data . . . . . . . . . . . . . . . . . . . . . . .
26
Management's Discussion and Analysis of Financial Condition and Results of Operations . .
36
Our Proforma Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
51
Competitive Strengths . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
64
Industry Trends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
66
Business Strategy and Future Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
67
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
69
Summary of the Digiland Share Option Plan . . . . . . . . . . . . . . . . . . . . . . . . .
76
Principal Shareholders and Share Capital . . . . . . . . . . . . . . . . . . . . . . . . . .
82
Transactions with Af®liates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
87
Description of Ordinary Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
94
Clearance and Settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
99
Annex A Ð Accountant's Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100
Annex B Ð Distribution Industry Background . . . . . . . . . . . . . . . . . . . . . . . .
138
Annex C Ð Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
140
Annex D Ð Material Contracts and Other Documents . . . . . . . . . . . . . . . . . . . .
142
Annex E Ð Our Web Sites and MIS Systems . . . . . . . . . . . . . . . . . . . . . . . .
143
Annex F Ð Responsibility Statements by Directors and Sponsor. . . . . . . . . . . . . . .
147
Annex G Ð Rules of the Digiland Share Option Plan . . . . . . . . . . . . . . . . . . . . .
148
1
CORPORATE INFORMATION
Board of Directors
:
Yeong Bou Wai, Daniel (Non-Executive Chairman)
Lim Tow Cheng (Managing Director)
Chua Kee Lock (Independent Director)
Lee Boon How (Independent Director)
Joint Company Secretaries
:
Tan San-Ju, F.C.I.S.
Wong Heng Hwie, C.P.A.
Registered Of®ce
:
14 Sungei Kadut Avenue
Singapore 729650
Share Registrar and Share
Transfer Of®ce
:
Lim Associates (Private) Ltd
10 Collyer Quay # 19-08
Ocean Building
Singapore 049315
Sponsor
:
The Development Bank of Singapore Ltd
6 Shenton Way
DBS Building Tower One
Singapore 068809
Auditors and Reporting
Accountants
:
Arthur Andersen
Certi®ed Public Accountants
10 Hoe Chiang Road # 18-00
Keppel Towers
Singapore 089315
Solicitors to the Introduction
:
Allen & Gledhill
36 Robinson Road # 18-01
City House
Singapore 068877
Principal Bankers
:
6 Shenton Way
Singapore 068809
Deutsche Bank AG, Singapore Branch
6 Shenton Way # 15-08
DBS Building Tower Two
Singapore 068809
Oversea-Chinese Banking Corporation Limited
65 Chulia Street
OCBC Centre
Singapore 049513
United Overseas Bank Limited
80 Raf¯es Place
UOB Plaza
Singapore 048624
2
DEFINITIONS
For the purpose of this Document, the following de®nitions apply throughout unless the context
otherwise requires:±
`Àct'' or ``Companies Act''
:
Companies Act, Chapter 50 of Singapore
`Àsia Paci®c''
:
Countries along the Paci®c Rim excluding the American
continents
`Àspiren''
:
Aspiren Pte Ltd
``Board of Directors''
:
Board of Directors of our Company as of the Latest
Practicable Date
``Books Closure Date''
:
The date on which the Transfer Books and Register of
Members of GIL will be closed to determine the entitlements
of GIL shareholders to GIL's Digiland Shares pursuant to the
Demerger
``CDP''
:
The Central Depository (Pte) Limited
``Compensation Committee''
:
Committee of our Board of Directors responsible for
administering and implementing the Plan
``Court''
:
The High Court of the Republic of Singapore
``DBS Bank'' or ``Sponsor''
:
``Demerger''
:
Demerger of the distribution business of the GIL Group
(presently carried on under the Proforma Digiland Group)
from the manufacturing business of the GIL Group (carried
on under the GES Group and the Eltech Group) by way of a
capital reduction under Section 73 of the Companies Act
``Digiland'' or ``Company''
:
Digiland International Pte Limited or, after its conversion into
a public company at the Digiland EGM, Digiland International
Limited (as the case may be)
``Digiland EGM''
:
Extraordinary general meeting of Digiland (and any
adjournment thereof) to be held after the GIL EGM but
before the effective date of the Demerger at which Digiland
will, among other things, (1) be converted into a public
company and (2) propose the adoption of the Plan and the
Digiland IPT Mandate
``Digiland Group''
:
Digiland, its subsidiaries and associated companies as of the
Latest Practicable Date
``Digiland IPT Mandate''
:
Mandate for the Proforma Digiland Group to enter into certain
interested person transactions on the terms set out in the
``Transactions with Af®liates'' section at pages 90 to 93 of
this Document
``Directors''
:
Directors of our Company as of the Latest Practicable Date
``Document''
:
This introductory document and any other supplementary
document which may be issued to amend, supplement or
update it
`Èltech''
:
Eltech Electronics Limited
3
`Èltech Group''
:
Eltech, its subsidiaries and associated company as of the
`Èxecutive Of®cers''
:
Principal executive of®cers of our Company as at the date of
this Document, unless otherwise stated
``FY''
:
Financial year ended 30 June
``GES''
:
GES (Singapore) Pte Ltd, a wholly-owned subsidiary of GIL
``GES Group''
:
GES, its subsidiaries and associated company as of the
``GIL''
:
GES International Limited
``GIL EGM''
Extraordinary general meeting of GIL (and any adjournment
thereof) to be held to approve, among other things, (1) the
Demerger; (2) GIL voting in favour of the Plan at the Digiland
EGM and (3) GIL voting in favour of the Digiland IPT Mandate
at the Digiland EGM
``GIL Group''
:
GIL, its subsidiaries and associated companies as of the
`Ìnfonet''
:
Infonet Systems and Services Pte Ltd
`Ìntroduction''
:
Introduction of our Company to the SGX-ST
`ÌT Products''
:
Computers, computer peripherals and information technology
products
``Latest Practicable Date''
:
7 January 2002, being the latest practicable date prior to the
printing of this Document
``Market Day''
:
A day on which the SGX-ST is open for trading in securities
``Members''
:
Persons (other than CDP) who are registered as holders of
ordinary shares in the capital of our Company in the Register
of Members of our Company and Depositors who have
ordinary shares in the capital of our Company entered
against their names in the Depository Register
``NTA''
:
Net Tangible Assets
`Òption''
:
An option, granted or to be granted under the Plan, to
subscribe for new Shares
``Plan''
:
The Digiland Share Option Plan, as may be amended or
supplemented from time to time, as reproduced at Annex G
and as summarised at pages 76 to 81 of this Document
``Proforma Digiland Group''
or ``Proforma Group''
:
Our Company, our subsidiaries and associated companies, as
if it had been in existence since 1 July 1998
``Proforma GIL Group''
:
GIL, its subsidiaries and associated companies excluding the
Proforma Digiland Group, as if it had been in existence since
1 July 1998
``Securities Account''
:
Securities account maintained by a Depositor with CDP (but
does not include a securities sub-account)
``SGX-ST''
:
Singapore Exchange Securities Trading Limited
4
``Share'' or ``Shares''
:
Ordinary shares of S$0.15 each in the capital of our Company
``Sub-division''
:
The proposed sub-division of each ordinary share of S$1.00
each in the capital of Digiland into 20 shares of S$0.05 each
followed by the consolidation of three such shares into one
share of S$0.15 each
``Trans Europe''
:
Trans Europe Computer Limited
``$'' or ``S$'' and ``cents''
:
Singapore dollars and cents, respectively
``per cent.'' or ``%''
:
Percentage or per centum
Digiland. References to ``we'', `ùs'', `òur'' and `òur Company'' in this Document are to Digiland
and, where the context requires, the Proforma Digiland Group.
Digiland Shareholders. References to ``you'', ``your'' and ``yours'' in this Document are to Digiland
shareholders.
Depositors. The expressions ``Depositor'', ``Depository Agent'' and ``Depository Register'' shall have
the same meanings ascribed to them, respectively, in Section 130A of the Companies Act.
Genders, etc. Words importing the singular only shall, where applicable, include the plural and vice
versa. Words importing the masculine gender shall, where applicable, include the feminine and neuter
genders. References to persons shall, where applicable, include corporations.
Headings. The headings in this Document are inserted for convenience only and shall be ignored in
construing this Document.
Time. Any reference to a time in this Document is a reference to Singapore time, unless otherwise
stated.
Rounding. Any discrepancies in the tables in this Document between the listed amounts and the
totals thereof are due to rounding.
Statutes. Any reference in this Document to any enactment is a reference to that enactment as for
the time being amended or re-enacted. Any term de®ned under the Companies Act or the SGX-ST
Listing Manual or any modi®cation thereof and used in this Document shall, where applicable, have
the meaning assigned to it under the Companies Act or the SGX-ST Listing Manual or any
modi®cation thereof, unless otherwise provided.
5
GLOSSARY OF TECHNICAL TERMS
To facilitate a better understanding of our business, the following glossary provides an explanation
(which should not be treated as being de®nitive of their meanings) on some of the technical terms
and abbreviations used in this Document:±
`Àpplication Service Provider''
or `ÀSP''
A service ®rm that provides a contractual service, offering to
deploy, host, manage and enhance what is usually packaged
application software from a centrally managed facility.
Applications are accessed remotely, for instance, over the Internet
or leased lines. ASPs provide all of the speci®c activities and
expertise aimed at managing the software application or set of
applications
``bandwidth''
A relative range of analog frequencies or digital signals that can be
passed through a transmission medium, such as glass ®bres,
without distortion. The greater the bandwidth, the greater the
information carrying capacity. Bandwidth is expressed in hertz for
analog devices or bits per second for digital devices
``Business-to-Business'' or
``B2B''
Business-to-business commerce involving sellers and purchasers
who are business entities, but not individual retail consumers
``Business-to-Consumer'' or
``B2C''
Business-to-consumer commerce involving individual consumers
purchasing products from manufacturers and service providers
``content''
Data in the form of text, image, sound or video, which appears on
web pages
``Domain Name''
A unique name which identi®es the location of a web site on the
Internet
`èlectronic commerce'' or
`è-commerce''
Refers to commercial transactions based on the electronic
transmission of data over a communications network. These
commercial transactions may take place B2B or B2C
`ÈRP''
Enterprise Resource Planning
`Ìnternet''
The Internet is the TCP/IP-based interconnection of servers
worldwide that provides communications and application services
to an international base of business, consumers, education,
research, government, and other organisations
`Ìnternet Service Provider'' or
`ÌSP''
A company or organisation that provides businesses and
individuals with access to the Internet. Whether for a monthly fee
or otherwise the ISP provides a software package, user name,
password and access phone number. ISPs also provide Internet
connectivity for networks of users
``MFG/PRO''
An ERP system from QAD Inc. which integrates substantially all
aspects of our business
``MIS''
Management Information Systems
``network''
A group of two or more computer systems linked together
`ÒLAP''
Online Analytical Processing
``real-time''
Systems that respond to input immediately
6
``server''
A server is a computer programme that provides services to other
computer programmes in the same or other computers. The
computer that a server programme runs on is also frequently
referred to as a server
``Stock Keeping Unit'' or
``SKUs''
The number of speci®c product available for sale. If a hardware
device or software package comes in different versions, there is
an SKU for each one
``system integrator''
An individual or an organisation that builds systems from a variety
of diverse components
``Transmission Control
Protocol/Internet Protocol
(TCP/IP)''
A communications protocol developed to allow messages to be
sent to multiple networks around the world, hence its use in the
worldwide Internet
``web'' or ``world wide web''
A worldwide network of servers that uses a special
communications protocol called the hypertext transport protocol
(HTTP) to link different servers throughout the Internet and permits
communication of graphics, video and sound
``web hosting''
The commercial housing and maintenance of web pages and web
sites for another party
``web page''
A single ®le stored on a web server that contains formatted text,
graphics and hyperlinks to other pages on the Internet
``web site''
A collection of related and linked web pages on the world-wide
web
7
LISTING ON THE SGX-ST
We have issued this Document in connection with the listing of our Company, Digiland International
Limited, on the Singapore Exchange Securities Trading Limited (the ``SGX-ST'') by way of an
introduction (the `Ìntroduction''). In this Document, we provide information on our Company, our
subsidiaries and associated companies (together, our ``Proforma Group'') and our ordinary shares
of par value S$0.15 each (``Shares'') in compliance with the SGX-ST's listing requirements.
We have received the in-principle approval of the SGX-ST for the listing of all our issued Shares as
well as the new Shares which may be issued pursuant to the exercise of Options to be granted
under the Plan on the Main Board of the SGX-ST. The SGX-ST assumes no responsibility for any
statements made, opinions expressed or reports contained in this Document. You should not take
the listing as an indication of the merits of the Introduction, the Proforma Digiland Group or the
Shares.
The Directors, individually and collectively, accept full responsibility for the accuracy of the information
given in this Document and con®rm, having made all reasonable enquiries, that to the best of their
knowledge, information and belief, there are no other material facts, the omission of which would
make any statement in this Document misleading and that this Document constitutes full and true
disclosure of all material facts about the Introduction and the Proforma Digiland Group.
No person is authorised to give any information or to make any representation not contained in this
Document in connection with the Introduction and, if given or made, such information or
representation must not be relied upon as having been authorised by our Company or the Sponsor.
Neither the delivery of this Document nor the Introduction shall, under any circumstances, constitute a
continuing representation or create any implication or suggestion that there has been no change in the
affairs of the Digiland Group or in any statement of fact or information contained in this Document
since the date of this Document.
Where such changes occur, we may make an announcement of the same to the SGX-ST. You should
take note of any such announcement and, upon release of such an announcement, shall be deemed
to have notice of such changes. Save as expressly stated in this Document, nothing herein is or may
be relied upon as, a promise or representation as to the future performance or policies of the Proforma
Digiland Group. No information in this Document should be considered to be business, legal or tax
advice.
This Document has been prepared solely for the purpose of the Introduction and may not be relied
upon by any persons for purposes other than the Introduction. Nothing in this Document constitutes
or shall be construed to constitute an offer, or invitation or solicitation in any jurisdiction. This
Document does not constitute and shall not be construed to constitute an offer, solicitation or
invitation to any person to subscribe for or purchase any of our securities.
This Document does not constitute a prospectus and has not been lodged with and registered by the
Registrar of Companies and Businesses in Singapore.
Copies of the Document may be obtained on request, subject to availability, from:±
Digiland International Limited
Singapore 729650
DBS Bank
6 Shenton Way # 28-00
Singapore 068809
Assuming our Company is admitted to the Of®cial List of the SGX-ST on 26 March 2002, trading of
the Shares is expected to commence on the same day.
8
DEMERGER
INTRODUCTION
Presently a 99.7 per cent. owned subsidiary of GES International Limited (``GIL''), we will demerge
from GIL following the distribution of GIL's shares in Digiland to GIL shareholders pursuant to a
capital reduction under Section 73 of the Act.
RATIONALE FOR DEMERGER
The GIL Group's current business activities comprise the manufacturing and distribution of
computers, computer peripherals and IT products (`ÌT Products''). Prior to the Demerger, the
manufacturing business of GIL is carried out under the GES Group and the Eltech Group and GIL's
distribution business is carried out under the Proforma Digiland Group. It is intended to demerge the
distribution business from the manufacturing business pursuant to the Demerger in order that the
businesses can independently establish their own business direction and identities. The Demerger
will help improve corporate visibility as well as management control and performance measurement
of the manufacturing and distribution businesses.
Digiland's proforma turnover increased from S$940.9 million in FY1999 to S$1,107.3 million in
FY2001. During this period, Digiland's proforma pro®t before taxation increased from S$4.5 million in
FY1999 to S$12.1 million in FY2001. Proforma GIL Group's turnover for the same period decreased
from S$559.5 million in FY1999 to S$500.7 million in FY2001. However, Proforma GIL Group's pro®t
before taxation increased from S$13.2 million to S$17.3 million. GIL's manufacturing and distribution
businesses therefore have dissimilar revenue ¯ows, cost structures and pro®t margins. The Demerger
would allow each business to have its board of directors, management team and employees focused
speci®cally on its own respective business and strategic opportunities. In addition, both businesses
will have greater ability to modify their business processes and organisation to better ®t the needs of
their respective business, customers and employees.
Digiland has ®nanced its business through a combination of cash ¯ow from operations, shareholders'
equity, bank borrowings, shareholder's loans from GIL and GES and trade credit from suppliers. As at
30 June 2001, on a proforma consolidated basis, the Proforma Digiland Group's total borrowings
amounted to approximately S$110.8 million, of which approximately S$72.7 million was due to the
Proforma GIL Group. Following the Demerger, Digiland will cease to be a subsidiary of GIL.
The management of Digiland would thus have greater ¯exibility to manage its ®nancing needs whether
through debt ®nancing or by tapping into the capital markets directly to fund its business and growth
opportunities. Digiland has, however, given an undertaking to the SGX-ST that it shall not raise any
capital from the equity market for six months following its listing. Digiland will also be able to
operate independently from GIL and have full autonomy over its business processes and
organisation. We will also be able to focus our management attention and resources on growth
opportunities for our distribution business, by pursuing strategies best suited to our markets and
goals, including mergers and/or acquisitions. In addition, the Demerger is expected to improve
managerial accountability and our ability to incentivise our management separately from that of GIL.
The Demerger is also bene®cial for the Proforma GIL Group as it will in turn be able to focus greater
management attention and resources on its retained manufacturing business and its related growth
opportunities in the IT Products industry. GIL will not maintain a distribution business following the
Demerger.
Following the Demerger, investors will also have greater opportunities to participate directly in the
growth of our Company and GIL in that they would have the ¯exibility to buy or sell shares in
Digiland or GIL directly. This will enable them to manage their investment exposure in these
businesses independently of each other.
9
STEPS TO THE DEMERGER
The Demerger will involve the following key steps:±
(1)
GES transferred its 65.9 per cent. shareholding in Trans Europe to our Company for
approximately S$1.7 million (being GES' original cost of investment in Trans Europe) by way of
a set-off of existing trade debts owing by GES to Digiland. The principal business of Trans
Europe was previously the trading of computer components but its business focus has now
shifted to the distribution of storage products bringing it in line with that of Digiland's. This
transfer was completed as of 28 September 2001;
(2)
GIL subscribed for approximately 27 million new Digiland ordinary shares of par value S$1 each
at S$1.185 in cash per share in order to provide additional working capital to Digiland. The
S$1.185 issue price of the new Digiland shares was derived in order that GIL may distribute its
Digiland shares to their shareholders on a one-for-one basis. This subscription was completed
on 10 January 2002;
(3)
GIL capitalised part of the outstanding amount owing to GIL by our Company. As of 30 June
2001, the audited net outstanding non-trade amount owing by Digiland to GIL was
approximately S$89.4 million. GIL converted approximately S$42.5 million of such amount into
new Digiland shares at par while Digiland will repay the balance out of internally generated
funds prior to the Demerger. This subscription was completed on 10 January 2002;
(4)
Digiland (a) sub-divided every ordinary share of par value S$1 each into 20 ordinary shares of par
value S$0.05 each after step (2) above and then (b) consolidated every three ordinary shares of
par value S$0.05 each into one ordinary share of S$0.15 each after step (3) (the ``Sub-Division'').
After steps (2), (3) and the Sub-Division, GIL now holds approximately 714 million Digiland
Shares, representing approximately 99.7 per cent. of the issued share capital of Digiland. The
number of Digiland Shares GIL holds will equal the number of issued GIL shares of
approximately 714 million shares. The Sub-Division was completed on 10 January 2002;
(5)
GIL will distribute all of its Digiland Shares to its shareholders so that they would receive one
Digiland Share for every GIL share held as of the Books Closure Date by way of a capital
reduction under Section 73 of the Companies Act; and
(6)
Digiland will seek a listing on the Main Board of the SGX-ST by way of an introduction. We have
received the in-principle approval of the SGX-ST for the listing of Digiland. Such approval should
not be taken as an indication of the merits of the Demerger, the Proforma Digiland Group or the
listing of Digiland on the SGX-ST.
Upon the completion of the Demerger, GIL shareholders will own, separately:±
(a)
listed shares in GIL. The Proforma GIL Group will hold the manufacturing business presently
carried on under the GES Group and the Eltech Group; and
(b)
listed shares in Digiland. The Proforma Digiland Group will hold the distribution business
presently carried on principally under the Digiland Group.
Digiland will be an independent public company and GIL will no longer own shares in Digiland. The
Proforma Digiland Group will serve as the vehicle driving the future growth and pro®tability of the
distribution business while the Proforma GIL Group is responsible for the manufacturing business.
10
DOCUMENT SUMMARY
This summary highlights certain information contained elsewhere in this Document. We urge you to
read this entire Document carefully, including our proforma consolidated ®nancial statements and
``Risk Factors'' before making an investment decision.
OUR BUSINESS
We are a leading Singapore-based wholesale distributor of IT Products to reseller customers in the
Asia Paci®c region and we have over 10 years of experience in the wholesale distribution business.
Our distribution division is our core business and we have an e-services division that helps enhance
our wholesale distribution business. Although the global electronics industry has slowed down over
the past year, we are still seeing strong sales in the region as certain economies which may have
lagged behind are taking the opportunity to upgrade their IT infrastructure at lower prices.
For FY2001, proforma turnover for our Proforma Group totalled S$1,107.3 million and proforma pro®t
attributable to the members of our Company totalled S$8.8 million.
Distribution Division: We distribute a wide range of products from over 30 international
manufacturers including Adaptec, Apple, Compaq, Epson, Fujitsu, Hewlett Packard, IBM, Maxtor,
Sharp and Viewsonic, to a network of over 13,000 reseller customers in nine countries and territories
across the Asia Paci®c region. In addition, we have distributorship rights for certain products in a
further two countries.
Our distribution network comprises a total of 30 distribution centres across the Asia Paci®c region, 13
of which are operated directly and 17 of which are operated through our local business partners in
China, Indonesia and Vietnam. Our wide network gives us the ability to quickly match demand with
supply and allocate products. If a supplier requires us to distribute a particular product, we have the
capacity to ef®ciently and effectively distribute it throughout the region because of our wide network
of reseller customers and our B2B web site.
In February 1999, we launched an online distribution B2B web site, known as
www.DigilandCommerce.com (``DigilandCommerce.com''), to provide our reseller customers with
the convenience of being able to place orders 24 hours a day through the Internet. A reseller
customer is able to track the status of his purchase order and can also be made aware of changes
in prices and inventory levels of particular products in real time. This further enhances our ability to
respond quickly to reseller customers' orders and to place products for distribution. It also allows
more ef®cient inventory management.
As of 30 June 2001, we had over 3,800 registered users for DigilandCommerce.com in Australia,
China, Malaysia, the Philippines, Singapore and Thailand. For FY2001, approximately 40 per cent. of
the total proforma turnover of our wholesale distribution business with reseller customers was
conducted through DigilandCommerce.com. On-line sales in Singapore accounted for approximately
70.0 per cent. of the total proforma turnover for our distribution division in Singapore for FY2001. We
intend to extend DigilandCommerce.com to the other countries where we currently operate by the
end of 2003, where viable.
We also have an end-user oriented retail web site, www.DigilandMall.com (``DigilandMall.com''),
allowing retail consumers to place on-line orders for IT Products and other consumer electronic
products.
For FY2001, proforma turnover for our distribution division totalled S$1,080.3 million and accounted
for approximately 97.6 per cent. of our total proforma turnover. Distribution turnover from Singapore
accounted for approximately 30.9 per cent. of the total turnover for the distribution division.
11
E-services Division: Our e-services division is operated through two wholly-owned subsidiaries,
Infonet Systems and Services Pte Ltd (`Ìnfonet'') and Aspiren Pte Ltd (`Àspiren''). Infonet offers
information technology and communication solutions and services, including systems con®guration,
integration, management and maintenance for a variety of software and hardware products as well
as consultancy and turnkey project management.
Aspiren offers e-commerce solutions which include analysis of an e-commerce initiative, design and
deployment of a web site and its integration with Enterprise Resource Planning (`ÈRP'') software
programmes, and training and support services. For FY2001, proforma turnover for our e-services
division totalled S$27.0 million and accounted for approximately 2.4 per cent. of our total proforma
turnover.
OUR DISTRIBUTION BUSINESS MODEL
We sell a range of IT Products, including personal computers, notebooks, servers, printers, plotters,
scanners, monitors, motherboards, storage products, computer networking products and supplies
such as ink cartridges, toners and special ®lm and paper. We purchased these IT Products from our
suppliers in bulk and sell them to a network of approximately 13,000 reseller customers in nine
countries across the Asia Paci®c region. Please refer to the sections entitled ``Products and
Services'' and ``Suppliers'' on pages 55 and 56 of this Document for further details on our IT
Products and suppliers.
Our sale of IT Products to reseller customers is characterised by a large number of relatively small
purchase orders from our reseller customers. These reseller customers comprise corporate reseller
customers, value-added reseller customers, direct marketers, original equipment manufacturers,
independent dealers and owner-operated retailers. Please refer to the section entitled `Àsia Paci®c
Reseller Customer Network'' on page 55 of this Document for further details on our customers. For
FY2001, we processed an average of approximately 1,300 wholesale transactions per week in
Singapore, with an average transaction size of approximately S$7,000. Although the exact number
varies, we believe the average transaction size is generally smaller in our other markets.
We distribute our IT Products to our customers in two principal ways:±
.
Traditional Distribution. Our traditional distribution business involves taking orders by
telephone, facsimile and in person from our reseller customers and physically ful®lling these
orders through inventory maintained in our network of distribution centres. Our distribution
network comprises a total of 30 distribution centres across the Asia Paci®c region, 13 of which
are operated directly and 17 of which are operated through our local business partners in China,
Indonesia and Vietnam. Our regional network of distribution centres is displayed in the map
found on the back cover of this Document.
.
On-line Distribution. Our B2B on-line web site, known as DigilandCommerce.com, provides our
registered reseller customers with the ability to place orders 24 hours a day through the Internet.
DigilandCommerce.com enables our reseller customers to purchase our products on-line 24
hours a day and also provides information on products, pricing and inventory levels, as well as
real-time personalised information such as status of credit of placed orders and invoice
information. We fulfil purchase orders from our registered users through inventory maintained in
our network of 30 distribution centres.
Our retail consumer web site, known as www.DigilandMall.com, serves the consumer market in
Singapore. We do not operate any retail shops but access our target market through this web
site. DigilandMall.com is a 24-hour virtual shopping mall providing consumers with access to a
variety of products including IT Products and consumer electronic products.
Our distribution turnover is based on the costs of products we sell plus a margin. The margins we
realise from sales to customers vary depending on the types of products sold, the reseller channel
involved and the market conditions at the time of the sale.
12
Generally, our products have limited life cycles, as suppliers are constantly introducing new or
improved product models in response to changing market demands. To boost the sales of their
existing range of products, our suppliers may undertake sales promotions which includes price
reduction and bundling related products. Such sales promotions adopted by our suppliers may
affect our turnover, as we may have to sell our products at lower prices. In such instances, we may
receive promotional rebates from our suppliers depending on the terms of our supplier's agreement
with each of our suppliers. Such rebates would lower our cost of purchases and help us maintain
our margins, as our sales prices to customers decline.
Many of our suppliers, including our major suppliers, have agreed to provide price protection and/or
stock rotation privileges to us as part of the distribution arrangements. Please refer to the sections
entitled ``Price Protection'' and ``Stock Rotation'' on page 58 of this Document for further details.
Under the terms for price protection, our suppliers would provide us with credits, subject to
complying with certain conditions, for declines in our inventory value resulting from the suppliers
reducing prices of their products to promote sales. We account for these credits by deducting the
equivalent amount from our original purchases, thus lowering our costs of purchases. For the stock
rotation arrangement, our suppliers would provide for us to exchange our existing stock for new
models and any price differences would then be credited to us. Similarly, as for price protection, we
book these credits by deducting the amount from our original purchases, therefore lowering our costs
of purchases. Price protection and stock rotation would therefore lower our costs of purchases and
hence, help us maintain our margins, as our sale prices to customers decline.
Depending on our cash ¯ows and agreements with suppliers, from time to time and on a case by case
basis, we may pay our suppliers before the due date for payment of certain purchases to take
advantage of certain prompt payment discounts.
In order to maintain our margins and control costs we rely on two major management tools:±
.
Inventory Control. MFG/PRO, an ERP system which integrates substantially all aspects of our
business, and DigilandQuikView play an important role in our inventory management as they
store and provide information on our inventory on a real-time basis. We regularly monitor sales
trends and stock levels to reduce excess inventory which could result from changes in customer
preferences or economic conditions and product obsolescence as a result of rapid technological
development.
.
Credit Control. Our credit control procedures differ for our wholesale and retail operations. In
our wholesale operations, where we are able to gauge a reseller customer's creditworthiness
over the course of an on-going relationship, we offer various credit terms to qualifying
customers. In order to determine the appropriate credit terms, we conduct a credit assessment
for each of our reseller customers. In addition, we monitor closely our reseller customers'
creditworthiness through our MFG/PRO system, which provides information on each reseller
customer's payment history and credit status. We accept only cheques or credit card
payments for our retail operations.
Further details on various aspects of our business are elaborated upon at pages 51 to 63 of this
Document. A write-up on the distribution industry can also be found at Annex B of this Document.
OUR COMPETITIVE STRENGTHS
We believe we have the following competitive strengths:±
.
Industry Reputation. We have been in the wholesale distribution business for more than 10
years. We believe we have a good reputation in the IT Products distribution industries in many
of the countries where we operate.
.
Established Regional Distribution Network. We distribute our products wholesale to a network
of over 13,000 reseller customers though our 30 distribution centres in the Asia Pacific region.
13
.
Wide Range of Products and Brands Offered to Our Customers. We distribute a wide range of
products and brands from over 30 international manufacturers and ship products ranging from
personal computers, servers and notebooks to hard disks and other storage devices, printers,
monitors and other peripherals. We are therefore a one-stop shop for many of our reseller
customers.
.
Relationships with Major Global IT Products Manufacturers. We believe we have established
good working relationships with our suppliers including a number of major global
manufacturers of IT Products. In 2001, we received numerous awards from our suppliers
including the Regional Wholesaler Award from Hewlett Packard and the Top Distributor for Asia
Pacific for Year 2000 (IBM Harddisk Drives) Award from IBM. We have also entered into strategic
distributorship arrangements with several of our important suppliers which will help ensure for
our reseller customers a ready source of the products they need.
.
Distribution Infrastructure. We have established a modern and reliable distribution network,
which is also accessible through our online B2B distribution interface. We believe that a ``click
and mortar'' model is the way forward in the IT Products distribution industry. Our B2B
operations are supported by advanced MIS infrastructural links which streamline the
distribution chain and deliver more efficient services to our customers while lowering our
business costs. We have therefore devoted substantial resources and management time to
developing modern distribution centres where inventory levels and such stock related
information can be monitored and be made available on-line. In this way, we do our best to
ensure the timely delivery of goods to our network of reseller customers.
.
Commitment to the Internet. We believe the development of the Internet as a medium of
commerce in the Asia Paci®c region has provided, and will continue to provide, a number of
new business opportunities and we are committed to pursuing those opportunities. We believe
we are one of the ®rst wholesale distributors in the Asia Paci®c region to have a regional online
B2B distribution capability and we will continue to deploy our B2B capability in the markets
where we operate. In addition, we believe our experience with DigilandCommerce.com will
allow us to generate additional revenue from the provision of information technology,
communication and e-commerce consulting services through Aspiren and Infonet.
OUR BUSINESS STRATEGY
Our business strategy is to strengthen our competitive position as a leading wholesale distributor of IT
Products to reseller customers in the Asia Pacific region while developing and enhancing our
e-services division to pursue other growth opportunities. In particular, we intend to:±
.
Expand Our Distribution Network. We are committed to expanding our network of reseller
customers through organic growth and mergers and acquisitions in the markets where we
currently operate and entry into new markets to extend our geographical reach. Our network
expanded from 8,500 reseller customers in early 1999 to over 13,000 today.
.
Expand the Range of Products and Brands Offered to Our Customers. We intend to increase
the range of products and brands we offer to our reseller customers in order to achieve optimal
economies of scale and to encourage our existing reseller customers to use us as their one-stop
shop for all their products.
.
Encourage Use of DigilandCommerce.com. We believe our online B2B distribution platform,
DigilandCommerce.com, allows us to deliver our products more quickly and efficiently to our
reseller customers. Through this platform, we are able to reach a greater number of reseller
customers without significant additional expenditure for each new reseller customer. In fact,
DigilandCommerce.com provides an overall costs saving stemming from a reduced need for us
to maintain a physical presence in certain areas where we operate. We intend, where viable, to
encourage all our reseller customers to use DigilandCommerce.com and will continually upgrade
and improve the capabilities of DigilandCommerce.com and MFG/PRO.
.
Offer Consulting Services Directly Related to Our Experience with B2B. Through our subsidiaries,
Infonet and Aspiren, we intend to expand our business by providing our clients with integrated
and comprehensive information technology, communication and e-commerce solutions that
enhance our clients' business operations and communications, based on the knowledge we
have gained from our B2B operations.
14
OUR SHAREHOLDERS
Our shareholders as of 10 January 2002 and immediately after the Demerger are (see ``Principal
Shareholders and Share Capital'' on pages 82 to 86 of this Document for futher details):±
As of 10 January 2002
Number of
Digiland
Shares
%
Immediately after
the Demerger
Number of
Digiland
Shares
%
Digiland Directors
Yeong Bou Wai, Daniel
1,000,000
0.1
4,111,549
0.6
Lim Tow Cheng
1,000,000
0.1
1,060,000
0.1
Chua Kee Lock
Ð
Ð
Ð
Ð
Lee Boon How
Ð
Ð
127,000
n.m.
Khoo Teng Liat
Ð
Ð
24,000
n.m.
Wong Heng Hwie
Ð
Ð
6,000
n.m.
Digiland Principal Executive Of®cers
Chan Weng Chong, Andrew
Goh Sing Hook, Simon
Wang Cheng Hua, Eugene
Ð
Ð
Ð
Ð
66,667
n.m.
856,769
0.1
133,333
n.m.
142,333
n.m.
Digiland Shareholders
Ng Won Lein, Sheila
300,000
n.m.
300,000
n.m.
714,001,597
99.7
Ð
Ð
Goh Lik Tuan
Ð
Ð
64,817,136
9.0
Liew Kim Choo
Ð
Ð
66,516,372
9.3
Alxia Pte Ltd
Ð
Ð
1,146,720
0.2
Andatino Investments Ltd
Ð
Ð
24,000,000
3.3
Almon Bury Agents Ltd
Ð
Ð
90,461,240
12.6
Ong Seow Yong
Ð
Ð
1,200,000
0.2
Richard John Colless
Ð
Ð
1,800,000
0.3
Terence Edward O'Connor
Ð
Ð
480,000
0.1
NTUC Income Co-operative Insurance Limited
Ð
Ð
40,851,000
5.7
Public shareholders
Ð
Ð
418,601,478
58.4
716,501,597
100
716,501,597
100
Total
The Shares held by GIL will be distributed to GIL shareholders pursuant to the Demerger. Following
the Demerger, the shareholdings of 99.7 per cent. of Digiland Shares will mirror the shareholdings of
GIL.
WHERE YOU CAN FIND US
Our contact particulars are as follows:±
Singapore 729650
Telephone: +(65) 788 9898
Email: [email protected]
Our wholesale distribution web site and on-line retail web site are www.DigilandCommerce.com and
www.DigilandMall.com, respectively. These web sites do not form part of this Document.
15
RISK FACTORS
We are vulnerable to a number of risks applicable to the industry and the areas in which we operate.
Our business, ®nancial condition or results of operations could be materially and adversely affected by
any of these risks. To the best of our knowledge and belief as at the date of this Document, all risks
that would have a material adverse impact on our business, results of operations or ®nancial condition
are set out below.
RISKS RELATING TO OUR BUSINESS AND THE INDUSTRY
We are dependent on trends in the global IT Products industry, including product cycles and
technological changes
As a distributor of IT Products, we are dependent on continuing demand for such products. The
computer industry has in the past been highly cyclical, and our business accordingly is dependent
on the cycles of the computer industry. In addition, we are subject to shortening product cycles of IT
Products and downward pressure on selling prices as newer and more technologically advanced
products enter mass production.
These trends may exert pressure on our margins and our pro®tability may be affected by changes in
the average selling prices of our major product lines and by changes in our operating costs and nonoperating expenses.
Although our margins are protected to a certain degree by price protection and stock rotation, which
are offered to us by most suppliers and are more fully described at page 58, there can be no
assurance that ¯uctuations in the IT Products industry cycle will not continue to affect our business,
or that the downward pressure on margins will not have a material adverse effect on our business,
®nancial condition and results of operations or our future prospects.
Our expansion strategy may not be successful
A key element of our business strategy involves the further expansion of our distribution operations
and e-commerce capabilities in the Asia Paci®c region. We presently have overseas operations in
Australia, China, Malaysia, the Philippines and Thailand and distribute to Indonesia and Vietnam. We
are considering developing further business opportunities in the rest of Asia, although we have no
formal plans, agreements or commitments to date. In addition to expansion into countries in which
we currently have no operations, we also foresee internal expansions in countries where we have
already established operations.
Our ability to expand our business overseas depends on our ability to identify suitable opportunities
and reach agreement with potential overseas partners on satisfactory commercial and technical terms.
There can be no assurance that such opportunities or agreements will be identi®ed or established. We
may be unable to identify geographic markets with suf®cient demand for our services, successfully
transplant and adapt our business model into such new markets or integrate any such new
businesses with our existing operations. We may also be unable to pro®tably manage additional
businesses and may incur costs and experience delays or other operational or ®nancial problems in
trying to do so.
In addition, acquired businesses may have contingent liabilities or other dif®culties that are not
revealed in our due diligence investigations. There can be no assurance that our continued efforts to
expand in the Asia Paci®c region will be successful. If our business does not continue to grow and
revenue levels do not increase suf®ciently to offset additional costs associated with such expansion,
our business could be harmed and the value of our Shares could be materially and adversely affected.
16
The nature of our operations outside Singapore and our continued expansion into emerging
markets could subject us to certain risks which we would not encounter if our business
operations were limited to a single country
Our operations outside Singapore accounted for approximately 67.4 per cent. of our total proforma
turnover for FY2001. Operating in foreign markets involves certain risks such as changing regulatory
environments, legal uncertainties regarding our rights and liabilities, tariffs and other trade barriers,
potentially adverse tax consequences and political and economic instability.
Many of the countries in which we operate are considered to be emerging markets in economic terms.
The risks associated with operating in foreign markets are often considered to be more acute in
emerging market countries, a common perception being that these countries are more susceptible to
political and economic volatility. Any political, economic or social instability experienced in any of the
countries in which we operate could have a material adverse effect on our business, ®nancial
condition and results of operations.
We may experience problems raising funds
Historically we have relied on internally generated funds, loans provided by GIL and GES and funds
made available through facilities offered to and operated by GIL and GES to ®nance our operations.
As of 30 June 2001, our proforma outstanding accounts payable, including an amount of S$72.7
million owed to Proforma GIL Group, totalled S$114.4 million. Please refer to the section entitled
``Transactions with Af®liates'' on pages 87 to 93 of this Document for further details.
Based on our proforma shareholders' equity of S$126.9 million and our total borrowings of $110.8
million as at 30 June 2001, our gearing ratio was 0.87 times. Our total borrowings comprise short
term borrowings of S$37.2 million, hire purchase obligations of S$0.9 million and amounts due to the
Proforma GIL Group of approximately S$72.7 million. Our short term ®nancing facilities are subject to
periodic review and renewal at the respective ®nancial institutions' discretion.
In addition, we expect that we will need to obtain additional debt or equity ®nancing to fund our future
operating expenses.
We cannot assure you that additional ®nancing will be available when needed or that, if available, such
®nancing will be obtained on terms that are favourable to us. We may not be able to obtain suf®cient
amount of ®nancing when needed. Future debt ®nancings could involve restrictive covenants and we
may not be able to obtain ®nancing with interest rates as favorable as those that GIL could obtain or
at all.
If funds are not available when required, our ability to carry out our business plan could be adversely
affected, and we may be required to scale back our growth and operations to reflect the extent of
available funding. If additional funds are raised through the issuance of equity or convertible debt
securities, the percentage ownership of our shareholders may be reduced. Additional debt financing,
on the other hand, may:±
.
limit our ability to pay dividends or require us to seek consents for the payment of dividends;
.
increase our vulnerability to general adverse economic and industry conditions;
.
limit our ability to pursue our growth plan;
.
require us to dedicate a substantial portion of our cash flow from operations to payments on our
debt, thereby reducing the availability of our cash flow to fund capital expenditure, working
capital requirements and other general corporate purposes; and
.
limit our ¯exibility in planning for, or reacting to, changes in our business and our industry.
If we are unable to obtain additional ®nancing on acceptable terms in the event that such ®nancing is
needed, our business, ®nancial condition and results of operations may be materially and adversely
affected.
17
Fluctuations in exchange rates may adversely affect our reported ®nancial results
We usually purchase the products we distribute within the relevant jurisdiction (except Indonesia and
Vietnam, where products are sourced in Singapore) and pay for such products in local currencies. We
will usually sell such products at a price ®xed in the local currency. We also purchase and sell a
portion of our products directly in US dollars.
For the purposes of our reported consolidated ®nancial results, we convert all of these transactions
into Singapore dollars. As a result, we are exposed to ¯uctuations between the exchange rates of
these currencies and there may also be a translational risk in our reporting, which cannot be
predicted.
In Singapore, for the year ended 30 June 2001, approximately 29.0 per cent. of our proforma sales
transactions were denominated in US dollars and 36.0 per cent. of our proforma purchases
transactions were denominated in US dollars. All other transactions are denominated in the local
currency of the countries we operate in. Please refer to the section entitled ``Foreign Currency
Exposure'' on page 50 of this Document for further details.
Although the impact of exchange rate ¯uctuations is partially mitigated by our practice of trading in
the relevant local currency where possible and hedging our foreign exchange currency receivables
and payables through forward exchange rate contracts, there can be no assurance that we will be
able to offset the overall impact of any exchange rate ¯uctuations in the future or that we will be
able to enter into such hedging arrangements on commercially reasonable terms.
We may be exposed to dif®culties arising from our relationships with joint venture partners and
minority shareholders
Our current operations in China, Indonesia, Vietnam and the Philippines are structured as joint
ventures with local business partners and/or may have local minority shareholders. We expect that
certain proposed and future operations may also be similarly structured. Such joint ventures involve
risks associated with the possibility that the joint venture partners, local business partners or
minority shareholders may (i) have economic or business interests or goals that are inconsistent with
ours, (ii) take action contrary to our instructions or requests or contrary to our policies or objectives
with respect to investments and projects, (iii) be unable or unwilling to ful®l their obligations under
the relevant joint venture or other agreements or (iv) experience ®nancial or other dif®culties.
Although we generally have the ability, either through contractual provisions or our representatives on
the relevant board of directors of each joint venture company, to control material decisions concerning
the operation and management of our business in these countries, we are not able unilaterally to
control the decision-making process of our joint ventures without reference to our joint venture
partners. Disputes with our partners could materially and adversely affect our business operations in
these jurisdictions.
We depend on our local business partners
We may also be dependent on our local business partners to provide assistance in obtaining business
and other licences necessary for the successful operation of our joint venture business. While we
believe that our current and proposed local business partners have the necessary connections to
assist in obtaining approvals, there is no guarantee that these local business partners will be
successful in helping the joint venture to obtain such approvals.
18
We depend on certain key employees, and the loss of certain of them may affect our business.
We will also need to attract and retain additional personnel
Our future performance is dependent upon the continued services and performance of our senior
management and other key personnel. If we were to lose the services of any of our key employees,
our overall operations may be affected.
Our future performance also depends on our continued ability to attract and retain other highly
quali®ed management, technical, sales and marketing personnel for each of our business operations.
Competition for such personnel is intense. There can be no assurance that we will retain our key
employees or that we will be successful in attracting, assimilating and retaining other highly quali®ed
employees in the future. The loss of any of our key personnel or the inability to attract and retain
additional quali®ed personnel may have a material adverse effect on our business, ®nancial condition
and results of operations.
A ®re or other calamity at one of our facilities could materially and adversely affect our business
A ®re or other calamity resulting in signi®cant damage at any of our facilities would have a material
adverse effect on our business, ®nancial condition and results of operations. While we maintain
insurance policies covering losses, including losses due to ®re, which we consider to be adequate,
we cannot assure you that it would be suf®cient to cover all of our potential losses. Our insurance
policies cover our buildings, equipment and inventory. We do not maintain business interruption
insurance and therefore there could be a signi®cant loss of revenue were one of our facilities to be
damaged by an unforeseen event, even if the physical damage to our facility caused by that event
was insured.
Our proforma ®nancial information may be of limited relevance
Our proforma ®nancial information presented in this Document has been prepared as if our group
corporate structure as at the date of the proforma consolidated ®nancial information had been in
existence throughout the periods presented, or since the dates of incorporation of the companies
included within our corporate structure, whichever is later.
The objective of the proforma ®nancial information is to show what our historical information might
have been had our group, as restructured, existed at an earlier date. Our proforma consolidated
®nancial information re¯ects the results of operations, ®nancial position and cash ¯ows of the
businesses transferred to us from GIL and GES in connection with the Demerger. As a result, our
proforma consolidated ®nancial information has been extracted from the consolidated ®nancial
statements of GIL using the historical results of operations and the historical basis of the assets and
liabilities of such businesses. Additionally, our proforma consolidated ®nancial information includes
certain assets, liabilities, turnover and expenses which are primarily associated with such businesses
and which were not historically recorded in our audited ®nancial statements.
Accordingly, the proforma ®nancial information we have included in this Document does not
necessarily re¯ect our results of operations, ®nancial position and cash ¯ows today or in the future
or what the results of operations, ®nancial position and cash ¯ows would have been had we been a
separate, stand-alone entity during the periods presented. This is due to our history of operating as
part of the larger GIL Group.
The proforma ®nancial information we have included in this Document does not necessarily
re¯ect the actual changes that will occur in our funding and operations as a result of the
Demerger.
19
RISKS RELATING TO OUR DISTRIBUTION BUSINESS
The majority of our products are sourced from a few key suppliers
Our two principal suppliers, Hewlett Packard and IBM, together accounted for approximately 71.8 per
cent. of our proforma distribution turnover during FY2001 (61.4 per cent. in FY2000). Hewlett Packard
and IBM accounted for 37.3 per cent. and 24.1 per cent., respectively, of our proforma distribution
turnover in FY2000 and 43.7 per cent. and 28.1 per cent., respectively, in FY2001.
We believe that a signi®cant portion of our future purchases will continue to be supplied by a few key
suppliers. Failure of any of our key suppliers to supply us with suf®cient products could have a
material adverse effect on our ®nancial condition and results of operations.
We depend on our suppliers for ®nancing
Our suppliers generally ship products to us on credit, and we are obligated to pay for the products we
receive within 30 to 60 days of arrival. We also sell products to our reseller customers on credit, and
require payment within seven to 60 days of delivery. As a result of these practices, we are signi®cantly
dependent upon our suppliers for ®nancing to support our operations.
Failure of our suppliers to continue to extend credit on this basis could have a material adverse effect
on our ®nancial condition.
Withdrawal of price protection privileges and stock rotation provided by suppliers may
adversely affect our business
It is the policy of most suppliers of technology products to protect distributors, such as ourselves,
who purchase directly from such suppliers, from the loss in value of inventory due to technological
change or the supplier's price reductions. Suppliers will generally credit us for declines in inventory
value resulting from the supplier's price reductions if we comply with certain conditions. Please refer
to the section entitled ``Price Protection'' on page 58 of this Document for further details on our price
protection privileges. For the last three ®nancial years, our stock write-offs averaged S$0.5 million or
0.05% of our average annual turnover.
Similarly, some suppliers also extend to us stock rotation privileges for certain high-end products
whereby we are permitted to exchange a product if it becomes obsolete or is discontinued for the
new versions of these products.
The industry practice discussed above is not embodied in some distribution agreements and does not
protect us in all cases from declines in inventory value. However we believe that these practices
provide a level of protection from such declines and are key to our ability to maintain high levels of
inventory. No assurance can be given, however, that such practices will continue or that they will
adequately protect us against declines in inventory value. If we were to lose our price protection and
stock rotation privileges we would be forced to alter our existing business model, which would have a
material adverse effect on our business, ®nancial condition and results of operations.
We face signi®cant competition, particularly in local markets where we are expanding
Our primary business, the wholesale distribution of IT Products in the local markets of the countries in
the region, is highly competitive, and we expect competition to intensify in the future. The inability to
penetrate local markets as a result of strong local competition would have a material adverse effect on
our business, ®nancial condition and results of operations.
20
A major breakdown or system failure in or third party attacks on our centralised computer
systems may adversely affect our business
Approximately 40 per cent. of our proforma wholesale distribution turnover for FY2001 were
conducted on our B2B website, www.DigilandCommerce.com. Our B2B systems and Management
Information System (``MIS'') are critical to our ability to provide prompt responses to customers'
orders and quick delivery. While we have a systems recovery plan and undertake a daily back-up of
our sales data and other information relating to our business operations, a major breakdown of our
centralised computer systems could have a material adverse effect on our business, ®nancial
condition and results of operations. Please refer to Annex E on pages 143 to 146 of this Document
for further details on our web sites and MIS systems.
Similarly, despite the precautions we have taken, natural disasters, power failures,
telecommunications failures or other unanticipated problems with our network infrastructure may
cause interruptions in our services. Our services could also be interrupted if our telecommunications
service providers fail to provide suf®cient data communications capacity as a result of a natural
disaster, operational disruption or any other reason.
We do not carry natural disaster or business interruption insurance to compensate us for losses that
may occur. Any damage or failure that causes a prolonged interruption in our services could reduce
our revenues and have a material adverse effect on our business, ®nancial condition and results of
operations.
Further, despite the implementation of security measures, our network infrastructure is vulnerable to
computer viruses, denial of service attacks and similar disruptive problems. Computer viruses or
problems caused by third parties could lead to interruptions, delays or termination of service to our
customers. Inappropriate use of the Internet by Internet users, including attempts to gain
unauthorised access to information or systems, commonly known as ``cracking'' or ``hacking'', could
also potentially jeopardise the security of con®dential information stored in our computer systems or
those of our customers.
As our wholesale distribution customers use the Internet for commercial transactions, any network
malfunction or security breach could cause these transactions to be delayed, not completed, or
completed with compromised security. This may cause losses to our customers or us or deter
customers from using DigilandCommerce.com, which may increase our costs for doing such
business.
RISKS RELATING TO OUR E-SERVICES BUSINESS
Our e-services revenues are dif®cult to predict because they are generated on a project-byproject basis
A signi®cant part of our e-services revenues is generated from fees for services rendered on a projectby-project basis, rather than under long-term contracts. The absence of long-term contracts creates
an uncertain revenue stream. To the extent that we are unable to add new major clients or to secure
new engagements with existing clients, our e-services business, results of operations and ®nancial
condition will be materially and adversely affected.
We derive a signi®cant portion of our e-services revenues from large projects for a limited number of
clients. The failure of any major client to pay for any services rendered to them could have a material
adverse effect on our business, ®nancial condition or results of operations.
Further, if we fail to estimate accurately the resources and time required for a project, to manage client
expectations effectively or to complete ®xed-price engagements within our budget, on time and to our
clients' satisfaction, we would be exposed to cost overruns, potentially leading to losses on these
engagements. This failure could materially and adversely affect our business, results of operations
and ®nancial condition.
21
We could face potential liability to clients
Many of our consulting engagements involve the deployment, implementation and maintenance of
Internet and other software applications that are critical to the operations of our clients' businesses.
Any defects or errors in these applications could result in delayed or lost revenue, adverse customer
reaction and negative publicity regarding us and our services or could require expensive corrections,
any of which could materially and adversely affect our business, results of operations and ®nancial
condition.
Our failure or inability to meet a client's expectations could injure our business reputation or result in a
claim for substantial damages against us, regardless of our responsibility for such failure. The
successful assertion of one or more large claims against us that are uninsured, exceed available
insurance coverage or result in changes to our insurance policies, including premium increases or
the imposition of a large deductible or co-insurance requirements, could materially and adversely
affect our business, results of operations and ®nancial condition.
POLITICAL, ECONOMIC, LEGAL AND REGULATORY RISKS
Regulation of the Internet could harm our business
The laws governing Internet transactions remain largely unsettled, even in areas where there has been
some legislative action. The applicability to the Internet of existing laws governing issues such as
property ownership, copyrights and other intellectual property issues, taxation, libel, obscenity and
personal privacy is unclear. The vast majority of these laws were adopted prior to the advent of the
Internet and related technologies and, as a result, do not contemplate or address the unique issues
they pose.
Due to the rapidly evolving and uncertain regulatory environment, it is dif®cult for us to predict how
changes to existing laws or the passage of new laws addressing the Internet and on-line services, as
well as the interpretation and enforcement of those laws, will affect the way in which we do business.
Such changes to the legal landscape could create uncertainty in the marketplace, which could result
in a reduction in the demand for our services, restrictions on the services we can provide, increases in
the cost of doing business as a result of litigation costs or increased service delivery costs, or other
presently unforeseeable material adverse effects on our business, ®nancial condition and results of
operations.
We are affected by various intellectual property issues
We regard our domain names, trademarks and similar intellectual property as important to establishing
and maintaining our reputation and brands. However, the steps we take to protect our proprietary
rights may be inadequate. Effective protection for our trademarks and other intellectual property may
not be available in all of the countries where we operate or will operate or may be available only at
considerable expense or delay. If we are unable to acquire or maintain the
``DigilandCommerce.com'' or ``DigilandMall.com'' domain names or related trademarks in all
countries in which we operate or into which we may seek to expand our operations, we may be
unable to prevent third parties from acquiring domain names that are similar to, infringe upon or
otherwise decrease the value of our trademarks and other proprietary rights.
22
RISKS RELATING TO THE LISTING AND OUR SHARES
Our Shares have never been listed and the Introduction may not result in an active or liquid
market for our Shares
Prior to the Introduction, there has not been a public market for our Shares. We cannot predict the
extent to which a trading market will develop or how liquid that market might become. No assurance
can be given that an active trading market for our Shares will develop or, if developed, will be
sustained. If an active trading market is not developed or sustained, the liquidity and trading price of
our Shares could be materially and adversely affected. You should not take the listing as an indication
of the merits of the Introduction, our Proforma Group or our Shares.
Market prices of, and trading volumes in, our Shares may be volatile
The trading prices of our Shares could be subject to ¯uctuations in response to various external
factors and events including differences between our Group's actual results of operations compared
to those expected by investors and analysts, changes in general economic conditions, changes in
accounting principles or other developments affecting us, our customers or our competitors,
changes in ®nancial estimates by securities analysts, the operating and stock price performance of
other companies and other events or factors. In addition, the global ®nancial markets have from time
to time experienced signi®cant price and volume ¯uctuations, which have particularly affected the
market prices of the shares of companies in the technology sector and which may be unrelated and
disproportionate to the results of operations and performance of such companies.
23
DIVIDEND POLICY
Our Company has not declared any dividends since its incorporation on 25 January 1994. Currently,
we do not have any dividend policy. Our future dividend policy will depend on our operating results,
®nancial condition, other cash requirements including capital expenditure, the terms of our borrowing
arrangements (if any), and other factors deemed relevant by our Directors.
In making their recommendation, our Directors will consider, among other things, our future earnings,
operations, capital requirements, cash ¯ow and ®nancial conditions, as well as general business
conditions and other factors which our Directors may consider appropriate.
There can be no assurance that dividends will be paid in the future or as to the amount or timing of
any dividends that are to be paid in the future.
Our Company may, by ordinary resolution, declare dividends at a general meeting, but it may not pay
dividends in excess of the amount recommended by our Directors. Our Directors may declare an
interim dividend without seeking our shareholders' approval. Our Company must pay all dividends
out of its pro®ts or pursuant to Section 69 of the Companies Act.
24
CAPITALISATION AND INDEBTEDNESS
We set forth in the table below the consolidated capitalisation of (i) the Digiland Group as at 30 June
2001, (ii) the Digiland Group as adjusted principally for the subscription of 27,000,000 new Digiland
ordinary shares of par value S$1.00 each at S$1.185 per share for cash by GIL and the issuance of
new Digiland ordinary shares of par value S$0.05 each at par pursuant to the capitalisation of a sum of
approximately S$42,475,240 owing by our Company to GIL, and (iii) the Proforma Group after the
Demerger.
You should read the following table in conjunction with the Proforma Group ®nancial information and
related notes appearing elsewhere in this Document and ``Management's Discussion and Analysis of
Financial Condition and Results of Operations''.
Demerger.
--------------------------------- As at 30 June 2001 ---------------------------------
Audited
(i)
As adjusted
for Demerger
(ii)
Unaudited
Proforma
Group(1)
(iii)
(S$'000)
(S$'000)
(S$'000)
19,784
19,784
19,784
34
125
125
38,000
107,475
107,475
33
5,033
5,033
Revenue reserves
(1,186)
(1,186)
16,774
Translation reserves
(1,954)
(1,954)
(2,365)
34,893
109,368
126,917
54,711
129, 277
146, 826
Short-term debt
Secured loans(2)
Long-term debt
Secured loans(3)
Shareholders' equity
Fully paid, outstanding share capital(4)
Share premium account
Reserves
Total shareholders' equity
Total Capitalisation
As at 31 December 2001, other than changes in retained pro®ts due to pro®ts earned after 30 June
2001, there are no other material changes in our total capitalisation after 30 June 2001.
Notes:±
(1) The Proforma Group's capitalisation has been prepared on the basis that it has been in existence since 1 July 1998.
(2) The short-term debt is secured by the following:±
(a) a surety agreement by our Company's directors/shareholders,
(b) corporate guarantees by our Company, and
(c) a pledge of ®xed deposits of a subsidiary as collateral.
(3) The long-term debt of approximately S$125,000 is secured by the following:±
(a) personal guarantee of a director of a subsidiary, and,
(b) motor vehicles of a subsidiary.
(4) Share capital increased from S$38,000,000 as at 30 June 2001 (audited) to S$107,475,240 as adjusted for the Demerger
taking into account the capitalisation of approximately S$42,475,240 in amount owing to GIL by Digiland and the
subscription for approximately 27 million new Digiland shares at S$1.185 in cash by GIL in order to provide additional
working capital to Digiland. Please refer to page 10 of this Document for details on the steps to the Demerger.
25
SUMMARY PROFORMA CONSOLIDATED FINANCIAL DATA
The following tables present our summary proforma consolidated ®nancial data. The data presented in
these tables have been prepared as if our group corporate structure as at the date of the proforma
consolidated ®nancial information had been in existence throughout the periods presented, or since
the dates of incorporation of the companies included within our corporate structure, whichever is
later. Our proforma consolidated ®nancial information re¯ects the results of operations, ®nancial
position and cash ¯ows of the businesses transferred to us from GIL and GES in connection with
the Demerger. As a result, our proforma consolidated ®nancial information has been extracted from
the consolidated ®nancial statements of GIL using the historical results of operations and the
historical basis of the assets and liabilities of such businesses. Additionally, our proforma
consolidated ®nancial information includes certain assets, liabilities, turnover and expenses which
are primarily associated with such businesses and which were not historically recorded in our
audited ®nancial statements. We believe the assumptions underlying our proforma consolidated
®nancial information to be reasonable. You should read this section in conjunction with
``Management's Discussion and Analysis of Financial Condition and Results of Operations'' and the
Accountants' Report set out at Annex A of this Document as well as the full text of this Document.
The objective of the proforma ®nancial information is to show what our historical information might
have been had our group, as restructured, existed at an earlier date. The proforma ®nancial
information included herein may not necessarily re¯ect our results of operations, ®nancial position
and cash ¯ows today or in the future or what the results of operations, ®nancial position and cash
¯ows would have been had we been a separate, stand-alone entity during the periods presented.
This is due to our history of operating as part of the larger GIL Group.
Demerger.
26
UNAUDITED RESULTS OF OPERATIONS OF OUR PROFORMA GROUP
The proforma ®nancial information for FY1999, FY2000 and FY2001 are derived from the GIL audited
consolidated ®nancial statements that are not included elsewhere in this Document assuming that our
Proforma Group has been in existence since 1 July 1998 or since the dates of incorporation of the
companies included within our corporate structure, whichever is later. Our proforma consolidated
®nancial information also re¯ect adjustments for the subscription of 27,000,000 new Digiland
approximately S$42,475,240 owing by our Company to GIL. Accordingly, the proforma ®nancial
information below does not necessarily re¯ect our results of operations today or in the future or
what the results of operations would have been had we been a separate, stand-alone entity during
the periods presented. This is due to our history of operating as part of the larger GIL Group.
These proforma ®nancial information included adjustments that are necessary to re¯ect the results of
operations of the businesses transferred to us from GIL and GES in connection with the Demerger.
Additionally, our proforma consolidated ®nancial information include certain turnover and expenses
which were not historically recorded at the level of, but are primarily associated with, such businesses.
Demerger.
Year ended 30 June
1999
2000
2001
(S$'000)
(S$'000)
(S$'000)
940,877
1,091,998
1,107,256
Other income
1,308
1,953
305
Changes in stocks of ®nished goods
5,506
15,923
14,042
(904,444)
(1,055,392)
(1,057,328)
(13,037)
(17,458)
(21,886)
(1,683)
(2,594)
(3,318)
(694)
(1,201)
(1,437)
(1,603)
(1,584)
(1,779)
(20,117)
(17,252)
(18,957)
Pro®t from operations
6,113
14,393
16,898
Financial expenses - net
(1,645)
(1,988)
(4,421)
4,468
12,405
12,477
Ð
(332)
(338)
Pro®t before taxation
4,468
12,073
12,139
Taxation
(1,482)
(4,330)
(4,219)
Pro®t after taxation
2,986
7,743
7,920
152
(994)
852
3,138
6,749
8,772
0.65
1.39
1.70
Turnover
Purchases
Personnel expenses
Depreciation
Sales commission
Freight and delivery expenses
Other operating expenses
Share of results of associated companies
Minority interests
Pro®t attributable to the members of our Company
Earnings per share (in cents)
- basic and fully diluted
27
UNAUDITED FINANCIAL POSITION OF OUR PROFORMA GROUP
The proforma ®nancial information for FY1999, FY2000 and FY2001 are derived from the GIL audited
consolidated ®nancial statements that are not included elsewhere in this Document assuming that our
Proforma Group has been in existence since 1 July 1998 or since the dates of incorporation of the
companies included within our corporate structure, whichever is later. Our proforma consolidated
®nancial information also re¯ect adjustments for the subscription of 27,000,000 new Digiland
approximately S$42,475,240 owing by our Company to GIL. Accordingly, the proforma ®nancial
information below does not necessarily re¯ect our ®nancial position today or in the future or what
the ®nancial position would have been had we been a separate, stand-alone entity during the
periods presented. This is due to our history of operating as part of the larger GIL Group.
These proforma ®nancial information included adjustments that are necessary to re¯ect the ®nancial
position of the businesses transferred to us from GIL and GES in connection with the Demerger.
Additionally, our proforma consolidated ®nancial information include certain assets and liabilities,
which were not historically recorded at the level of, but are primarily associated with, such businesses.
Demerger.
----------------------------- As at 30 June ----------------------------1999
2000
2001
(S$'000)
(S$'000)
(S$'000)
Fixed assets
Investment in associated companies
Goodwill on consolidation
Other investments
Current assets
Stocks
Trade debtors
Other debtors, deposits and prepayments
Due from associated companies (trade)
Due from an associated company (non-trade)
Due from af®liated companies (trade)
Due from directors of a subsidiary
8,890
9,006
10,021
Ð
1,048
710
2,587
2,451
2,599
215
Ð
Ð
56,937
72,860
86,902
84,786
120,893
136,442
6,526
10,542
18,123
142
311
220
Ð
19
Ð
12,549
16,773
20,093
898
Ð
Ð
Short-term investment
1,690
Ð
Ð
Fixed deposits
1,403
12,307
13,417
Cash and bank balances
7,923
12,771
18,658
172,854
246,476
293,855
Current liabilities
Trade creditors
39,818
54,496
41,728
Bills payable
11,841
15,945
15,122
Balances due to Proforma GIL Group(1)
39,385
63,799
72,658
5,913
6,549
10,164
Ð
2
Ð
1,536
5,366
9,487
Ð
245
119
Other creditors and accruals
Due to directors
Provision for taxation
Long-term bank loans (current)
Hire purchase liabilities (current portion)
147
358
447
Short-term bank loans
116
14,301
19,784
4,042
811
2,134
102,798
161,872
171,643
70,056
84,604
122,212
Bank overdrafts
Net current assets
28
----------------------------- As at 30 June ----------------------------1999
2000
2001
(S$'000)
(S$'000)
(S$'000)
Other non-current liabilities
Minority interests
(1,029)
(1,589)
(1,035)
80,719
95,520
134,507
78,352
88,376
126,917
2,367
7,144
7,590
80,719
95,520
134,507
Note:±
(1) Balances due to Proforma GIL Group consist of outstanding trade and non-trade balances owing by the Proforma Digiland
Group to the Proforma GIL Group. However, we intend to repay approximately S$47 million of the outstanding balance prior
to the Demerger. The remaining balance owing to the Proforma GIL Group will be repaid as and when they fall due.
29
The following tables set out the adjustments made to obtain the proforma consolidated results of
operations and statement of financial position for FY1999, FY2000 and FY2001:±
Adjustments to obtain proforma consolidated results of operations for FY1999
The proforma ®nancial information for FY1999 are derived from the GIL consolidated ®nancial
statements that are not included elsewhere in this Document assuming that our Proforma Group has
been in existence since 1 July 1998 or since the dates of incorporation of the companies included
within our corporate structure, whichever is later. Our proforma consolidated ®nancial information
also re¯ect adjustments for the subscription of 27,000,000 new Digiland ordinary shares of par value
S$1.00 each at S$1.185 per share for cash by GIL and the issuance of new Digiland ordinary shares of
par value S$0.05 each at par pursuant to the capitalisation of a sum of approximately S$42,475,240
owing by our Company to GIL. Accordingly, the proforma ®nancial information below does not
necessarily re¯ect our results of operations today or in the future or what the results of operations
would have been had we been a separate, stand-alone entity during the periods presented. This is
due to our history of operating as part of the larger GIL Group.
Demerger.
Turnover
Other operating income
Changes in stocks of
®nished goods
Digiland
International
Limited
Trans
Europe
Computer
Limited
Digiland
Pty Ltd
Others
Combined
Total
Proforma
Adjustments
Proforma
Total
(S$'000)
(S$'000)
(S$'000)
(S$'000)
(S$'000)
(S$'000)
(S$'000)
406,044
335,036
111,460
99,516
952,056
(11,179)
178
168
34
928
1,308
Ð
(1)
940,877
1,308
(2,377)
2,102
3,931
1,850
5,506
(388,758)
(330,438)
(108,526)
(93,889)
(921,611)
(4,580)
(1,342)
(3,661)
(3,454)
(13,037)
Ð
(13,037)
Depreciation
(498)
(180)
(334)
(613)
(1,625)
(58)
(1,683)
Sales commission
(333)
Ð
(231)
(130)
(694)
Ð
(694)
Purchases
Personnel expenses
Freights and delivery
Ð
5,506
17,167(2)
(904,444)
(478)
(680)
(250)
(195)
(1,603)
Ð
(1,603)
(6,676)
(5,437)
(3,311)
(4,355)
(19,779)
(338)
(20,117)
2,522
(771)
(888)
(342)
521
Financial expenses Ð net
Operating pro®t
Share of results of
associated companies
Taxation
Minority interest
Pro®t attributable to
members of Digiland
(622)
(235)
16
637
(204)
1,900
(1,006)
(872)
295
317
Ð
Ð
Ð
Ð
Ð
1,900
(1,006)
(872)
295
317
(278)
(30)
40
26
(242)
1,622
(1,036)
(832)
321
75
31
Ð
Ð
Ð
31
1,653
(1,036)
(832)
321
106
6,113
(1,441)
(3)
(1,645)
4,468
Ð
Ð
4,468
(1,240)
(4)
(1,482)
2,986
121
152
3,138
Notes:±
(1) Proforma adjustments to (a) eliminate transactions between Digiland Group and Trans Europe and (b) eliminate transactions
between certain of Digiland's subsidiaries which were formerly held under GIL or GES but assumed to be acquired since
1 July 1998.
(2) Proforma adjustments to (a) eliminate transactions between Digiland Group and Trans Europe, (b) to re¯ect the income and
costs relating to distribution activities previously undertaken by GES but assumed to be performed by Digiland and (c) to
re¯ect the reduction in costs as a result of prompt payments of certain purchases.
(3) Notional interest charged by GIL for funding provided to the Digiland Group.
(4) Notional tax expenses on proforma pro®t as a result of transfer of distribution activities from GES to Digiland.
30
Adjustments to obtain proforma consolidated statements of ®nancial position as at 30 June
1999
The proforma ®nancial information for FY1999 are derived from the GIL audited consolidated ®nancial
necessarily re¯ect our ®nancial position today or in the future or what the ®nancial position would
have been had we been a separate, stand-alone entity during the periods presented. This is due to
our history of operating as part of the larger GIL Group.
Demerger.
Fixed assets
Digiland
International
Limited
Trans
Europe
Computer
Limited
Digiland
Pty Ltd
Others
Combined
Total
Proforma
Adjustments
Proforma
Total
(S$'000)
(S$'000)
(S$'000)
(S$'000)
(S$'000)
(S$'000)
(S$'000)
1,164
726
2,389
8,632
258
4,353
8,890
Investments in subsidiaries
Ð
Ð
Ð
241
241
(241)
Ð
Other investments
Ð
215
Ð
Ð
215
Ð
215
Future tax bene®ts
Ð
Ð
343
Ð
343
(343)
Ð
Pre-operating expenses
Ð
Ð
Ð
236
236
(236)
Ð
Ð
Ð
407
Ð
407
2,180
2,587
(1)
172,854
Current assets
92,515
12,281
30,854
36,949
172,599
Balances due to Proforma
GIL Group(2)
(73,092)
6
(17,697)
(21,497)
(112,280)
Current liabilities
(19,500)
(13,020)
(13,247)
(16,108)
(61,875)
(77)
(733)
(90)
(656)
(1,556)
(240)
(50)
(717)
(22)
(1,029)
4,036
596
669
2,188
7,489
Share equity and reserves
2,267
596
669
2,187
5,719
72,633(4)(6)
78,352
Minority interest
1,769
Ð
Ð
1
1,770
597
2,367
4,036
596
669
2,188
7,489
Net current assets
Non-current liabilites
255
72,895(3)(4)
(39,385)
(1,538) (1)(5)
(63,413)
70,056
Ð
(1,029)
80,719
80,719
Notes:±
(1) Proforma adjustments to eliminate (a) balances between Digiland and TransEurope and (b) balances between certain of
Digiland's subsidiaries which were formerly held under GIL or GES but assumed to be acquired since 1 July 1998.
(3) Adjustments to re¯ect (a) notional amount payable to Proforma GIL Group for Digiland's investment in certain of its
subsidiaries which were formerly held under GIL or GES and (b) reduction in amount payable to Proforma GIL as a result
of transfer of distribution activities from GES to Digiland.
(4) Proforma adjustments to re¯ect (a) capitalisation of amount owing to GIL of S$42.5 million into Digiland's shares and (b)
settlement of debts by using the proceeds of S$32.0 million from the issuance of new Digiland shares to GIL.
(5) Notional tax liabilities as a result of income from distribution activities previously undertaken by GES assumed to be
performed by Digiland.
(6) Adjustment to re¯ect notional accumulated pro®ts as a result of transfer of distribution activities from GES to Digiland.
31
Demerger.
Turnover
Digiland
International
Limited
Trans
Europe
Computer
Limited
Combined
Total
Proforma
Adjustments
Proforma
Total
(S$'000)
(S$'000)
(S$'000)
(S$'000)
(S$'000)
706,350
348,782
1,055,132
(1)(2)(3)
36,866
1,091,998
1,822
131
1,953
(3,240)
3,981
741
(667,996)
(346,799)
(1,014,795)
(15,500)
(1,958)
(17,458)
Ð
(17,458)
Depreciation
(1,749)
(171)
(1,920)
(674)
(2,594)
Sales commission
(1,201)
Ð
(1,201)
Ð
(1,201)
(1,115)
(470)
(1,585)
1
(1,584)
(13,338)
(1,973)
(15,311)
4,033
1,523
5,556
(39)
(75)
(114)
3,994
1,448
5,442
(332)
Ð
(332)
3,662
1,448
5,110
Taxation
(1,647)
(275)
(1,922)
2,015
1,173
3,188
(592)
Ð
(592)
1,423
1,173
2,596
Purchases
Personnel expenses
Operating pro®t
Minority interest
Pro®t attributable to members of Digiland
1,953
15,182(2)
(40,597) (1)(2)(3)
(1,941) (1)
15,923
(1,055,392)
(17,252)
14,393
(1,874) (4)
(1,988)
12,405
Ð
(332)
12,073
(2,408) (5)
(4,330)
7,743
(402) (2)
(994)
6,749
Notes:±
(1) Proforma adjustments to eliminate transactions between Digiland Group and Trans Europe.
(2) Proforma adjustments to include transactions of certain of its subsidiaries which were formerly held under GIL or GES
during the year but assumed to be acquired since 1 July 1998.
32
2000
Demerger.
Digiland
International
Limited
Trans
Europe
Computer
Limited
Combined
Total
Proforma
Adjustments
Proforma
Total
(S$'000)
(S$'000)
(S$'000)
(S$'000)
(S$'000)
Fixed assets
8,476
294
8,770
236
9,006
Investments in associated companies
1,048
Ð
1,048
Ð
1,048
1,589
Ð
1,589
862
Current assets
242,349
(2)
16,691
259,040
(12,564)
2,451
(1)
(63,799)
8,271(1)(5)
(98,073)
(146,528)
(103)
(146,631)
(89,906)
(16,438)
(106,344)
Net current assets
5,915
150
6,065
Non-current liabilities
(1,476)
(113)
(1,589)
15,552
331
15,883
7,355
331
7,686
80,690(4)(6)
Minority interest
8,197
Ð
8,197
(1,053)
15,552
331
15,883
Balances due to Proforma GIL Group
Current liabilities
246,476
(3)(4)
82,832
84,604
Ð
(1,589)
95,520
88,376
7,144
95,520
Notes:±
(1) Proforma adjustments to eliminate balances between Digiland and Trans Europe.
33
Demerger.
Turnover
Changes in stocks of ®nished
goods
Purchases
Digiland
International
Limited
Trans
Europe
Computer
Limited
Combined
Total
Proforma
Adjustments
(S$'000)
(S$'000)
(S$'000)
(S$'000)
Proforma
Total
(S$'000)
(1)
952,022
274,123
1,226,145
(118,889)
311
9
320
(15)
305
17,591
(3,806)
13,785
257
14,042
(1)(2)
1,107,256
(928,841)
(264,256)
(1,193,097)
135,769
(1,057,328)
(18,790)
(3,096)
(21,886)
Ð
(21,886)
Depreciation
(3,082)
(235)
(3,317)
(1)
(3,318)
Sales commission
(1,437)
Ð
(1,437)
Ð
(1,437)
Personnel expenses
(1,675)
(104)
(1,779)
Ð
(1,779)
(14,935)
(3,263)
(18,198)
(759)
(18,957)
1,164
(628)
536
Financial expenses - net
(2,863)
142
(2,721)
Operating pro®t
(1,699)
(486)
(2,185)
(338)
Ð
(338)
(2,037)
(486)
(2,523)
Taxation
(1,223)
578
(645)
(3,260)
92
(3,168)
883
Ð
883
(2,377)
92
(2,285)
Share of results of associated
companies
Minority interest
Pro®t attributable to members
of Digiland
16,898
(1,700) (3)
(4,421)
12,477
Ð
(338)
12,139
(3,574) (4)
(4,219)
7,920
(31)
852
8,772
Notes:±
(1) Proforma adjustments to (a) eliminate transactions between Digiland Group and Trans Europe and (b) to re¯ect the income
relating to the provision of certain services rendered to the GIL Group.
34
2001
Demerger.
Digiland
International
Limited
(S$'000)
Fixed assets
Trans
Europe
Computer
Limited
(S$'000)
Combined
Total
(S$'000)
Proforma
Adjustments
(S$'000)
Proforma
Total
(S$'000)
9,141
644
9,785
236
10,021
Investments in associated
companies
710
Ð
710
Ð
710
2,959
Ð
2,959
(360)
2,599
Current assets
276,464
17,430
293,894
(39)
293,855
Balances due to Proforma GIL
Group(1)
(156,803)
(15,632)
(172,435)
99,777(2)(3)
(72,658)
(4)
Current liabilities
(89,072)
(2,001)
(91,073)
Net current assets
30,589
(203)
30,386
(1,035)
Ð
(1,035)
42,364
441
42,805
34,893
441
35,334
91,583(3)(5)
7,471
Ð
7,471
119
42,364
441
42,805
Minority interest
(7,912)
(98,985)
122,212
Ð
(1,035)
134,507
126,917
7,590
134,507
Notes:±
35
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis of our ®nancial condition and results of operations should be
read in conjunction with the proforma consolidated ®nancial information and the notes thereto for
each of the FY1999, FY2000 and FY2001 included elsewhere in this Document. This discussion may
contain forward-looking statements that involve risks and uncertainties. Our actual results could differ
materially from those anticipated in these forward-looking statements as a result of certain factors,
including, but not limited to, those set forth under ``Risk Factors'' and elsewhere in this Document.
OVERVIEW
We have two principal businesses:±
.
Our core business is the wholesale distribution of IT Products to reseller customers in the
Asia-Paci®c region; and
.
our e-services business involves the provision of information technology, communication and
e-commerce solutions and services.
The primary factors which have affected, and which we expect to continue to affect, our revenue and
operating pro®t include:±
.
global demand for IT Products;
.
volume and range of the products we distribute;
.
number of reseller customers in our existing and new markets;
.
usage of our on-line distribution B2B platform and the productivity gains we derive from the use of
that platform; and
.
our operating expenses including our personnel expenses.
PROFORMA CONSOLIDATED RESULTS OF OPERATIONS
Demerger.
The following table summarises our proforma results of operations from both the divisions for FY1999,
FY2000 and FY2001:±
Turnover by division
------- FY1999 ------
------- FY2000 ------
------- FY2001 ------
(S$'000)
(S$'000)
(S$'000)
Distribution Division
927,186
1,063,292
1,080,287
E-services Division
13,691
28,706
26,969
940,877
1,091,998
1,107,256
Total
Profit before taxation by division
E-services Division
Total
36
------- FY1999 ------
------- FY2000 ------
------- FY2001 ------
(S$'000)
(S$'000)
(S$'000)
4,379
10,735
11,740
89
1,338
399
4,468
12,073
12,139
Profit after taxation by division
E-services Division
Total
------- FY1999 ------
------- FY2000 ------
------- FY2001 ------
(S$'000)
(S$'000)
(S$'000)
2,920
6,746
7,752
66
997
168
2,986
7,743
7,920
DISTRIBUTION BUSINESS
Our Turnover
We distribute IT Products on a wholesale basis to our reseller customers in our regional markets and
through our on-line distribution B2B web site, DigilandCommerce.com, to registered reseller
customers in Australia, China, Malaysia, the Philippines, Singapore and Thailand. Approximately 40
per cent. of our proforma distribution turnover was contributed by our on-line distribution B2B web
site while the remaining 60 per cent. of our proforma distribution turnover was contributed by sale
though our sales force to our reseller customers. We also distribute IT Products and electronic
products through our B2C web site, DigilandMall.com, to retail customers. As at 30 June 2001, our
network has grown to over 13,000 reseller customers. Our distribution business accounted for 97.6
per cent. of our proforma consolidated turnover for FY2001.
Our core wholesale distribution business is characterised by the sale of products on a volume basis,
achieved through our extensive network of over 13,000 reseller customers across the Asia Paci®c
region. These reseller customers comprise corporate reseller customers, value-added reseller
customers, direct marketers, original equipment manufacturers, independent dealers and
owner-operated retailers. For FY2001, we processed an average of approximately 1,300 wholesale
transactions per week in Singapore, with an average transaction size of approximately S$7,000.
Although the exact number varies, we believe the average transaction size is generally smaller in our
other markets.
Our turnover comprises the costs of purchasing the products from suppliers plus a margin. The
margins we realise from sales to customers vary depending on the types of products sold, the
reseller channel involved and the market conditions at the time of the sale. For sales of IT Products
from our larger suppliers, such as Hewlett Packard and IBM, we generally adhere to the
recommended prices established by such suppliers. We recognise turnover upon the delivery of the
products and their acceptance by our resellers.
Generally, our products have limited life cycles, as suppliers are constantly introducing new or
improved product models in response to changing market demands. To boost the sales of their
existing range of products, our suppliers may undertake sales promotions which includes price
reduction and bundling related products. Such sales promotions adopted by our suppliers may
affect our turnover, as we may have to sell our products at lower prices. In such instances, we may
receive promotional rebates from our suppliers depending on the terms of our supplier's agreement
with each of our suppliers. Such rebates would lower our cost of purchases and help us maintain
our margins, as our sales prices to customers decline.
Many of our suppliers, including our major suppliers, have agreed to provide price protection and/or
stock rotation privileges to us as part of the distribution arrangements. Please refer to the sections
entitled ``Price Protection'' and ``Stock Rotation'' on page 58 of this Document for further details.
Under the terms for price protection, our suppliers would provide us with credits, subject to
complying with certain conditions, for declines in our inventory value resulting from the suppliers
reducing prices of their products to promote sales. We account for these credits by deducting the
equivalent amount from our original purchases, thus lowering our costs of purchases. For the stock
rotation arrangement, our suppliers would provide for us to exchange our existing stock for new
models and any price differences would then be credited to us. Similarly, as for price protection, we
book these credits by deducting the amount from our original purchases, therefore lowering our costs
of purchases. Price protection and stock rotation would therefore lower our costs of purchases and
hence, help us maintain our margins, as our sale prices to customers decline.
37
Our turnover in a geographical region principally depends upon the total number of our resellers, the
sales channels through which those customers operate, the range of products we offer in that country
and the maturity of the market for IT Products generally, including levels of consumer demand.
Historically, Hewlett Packard, IBM and Datamini/DMC products have been key contributors to our
turnover. For FY2001, approximately 43.7 per cent. of the proforma turnover from our distribution
division was generated from the sale of Hewlett Packard products and 28.1 per cent. from IBM
products. Similarly, certain products have typically been signi®cant contributors to our turnover. For
FY2001, approximately 15.8 per cent. of our proforma turnover from our distribution division was
generated from the sale of personal computers, 45.2 per cent. from components including storage
products and 13.0 per cent. from printers.
The general perception is that turnover from distribution of IT Products tends to be higher in the
second half of the calendar year because of increased purchases by end-customers during the
festive season, which is in line with most retail businesses. However, we have not seen any marked
seasonality in our results of operations thus far as we distribute a wide range of IT Products over
diverse markets.
Our Costs
Demerger.
Distribution Costs
------- FY1999 ------
------- FY2000 ------
------- FY2001 ------
(S$'000)
(S$'000)
(S$'000)
4,042
15,129
14,954
(891,482)
(1,032,874)
(1,040,343)
(11,505)
(13,589)
(16,777)
(1,529)
(2,099)
(1,550)
(636)
(1,059)
(1,271)
(1,589)
(1,520)
(1,724)
(19,717)
(16,529)
(17,571)
1,308
1,950
119
(921,108)
(1,050,591)
(1,064,163)
Cost of Product Sold
Changes in Stocks of Finished Goods
Purchases
Personnel Expenses
Selling and Administrative Expenses
Depreciation
Sales Commission
Freight & Delivery
Other Operating Expenses
Other Income
Total
Our distribution costs comprise mainly our costs of products sold, personnel expenses and selling
and administrative expenses.
Our primary distribution cost is the cost of the products we sell, adjusted for any price protection
credits we may receive from suppliers. Our cost of products sold accounted for approximately 96.4
per cent. of our total distribution costs in FY2001.
We also incur personnel expenses which includes the salaries and expenses of our sales force and the
salaries and expenses related to our operations in the Asia Paci®c region. Our personnel expenses
accounted for approximately 1.6 per cent. of our total distribution costs in FY2001.
38
The other signi®cant expense is our selling and administrative expenses, which comprise depreciation,
sales commission, freight and delivery and other operating expenses. Our selling and administrative
expenses are associated with the establishment of new distribution centres and ful®lment facilities in
the Asia Paci®c region, the delivery of products to resellers, as well as the development, maintenance
and upgrading of our web sites. Certain of the costs relating to the development of our B2B web sites
have been capitalised and are being depreciated over a period of three to ®ve years depending on the
nature of the cost. We believe our selling expenses, particularly relating to the cost per order dollar for
wholesale distribution, should decline as a percentage of turnover as more of our wholesale
distribution business is conducted over the Internet.
Whilst we have seen some ef®ciency gains from the use of our DigilandCommerce.com B2B web site
since its launch in February 1999 and have enjoyed the resulting overall reduction in our operating
costs in our distribution division, we have also incurred certain additional expenses with respect to
the development and roll-out of this web site and in the promotion of our on-line retail B2C web site,
DigilandMall.com. On the whole, we have achieved improvements in operating margins and expect
that further improvements can be obtained from the ef®ciencies arising from the use of
DigilandCommerce.com. Our selling and administrative expenses accounted for approximately 2.1
per cent. of our total distribution costs in FY2001.
Other income comprises pro®t from sale of ®xed assets and other non-operating income.
Taxation
Our distribution business is subject to various tax regimes arising from our operations in the different
jurisdictions. Any change in tax laws and regulations or the interpretation or application thereof may
adversely affect our earnings and tax liabilities.
In the case of Shanghai ECC-Digiland International Trading Co., Ltd, our 52.5 per cent. owned
subsidiary incorporated in China, we are subject to income tax at a reduced rate of 15 per cent. in
accordance with the ``Regulations of Shanghai Wai Gao Qiao Free Trade Zone''.
The taxation charge of our distribution division is higher than that arrived at by applying the respective
statutory tax rate to the pro®t of the individual companies in the Proforma Group principally because
losses arising in certain subsidiaries cannot be set off against pro®ts of other subsidiaries, and certain
expenses are not deductible for tax purposes.
E-SERVICES BUSINESS
Our Turnover
Our e-services division provides after-sales service such as repair, maintenance and technical support
services on behalf of certain of our wholesale suppliers. In addition, we also provide information
technology, communication and e-commerce solutions services to our customers. Our e-services
business accounted for approximately 2.4 per cent. of our proforma consolidated turnover for FY2001.
Turnover in our e-services division is dependent upon the number and type of projects in which we
are employed. Turnover is recognised on the percentage completion basis and a portion of our
project fees is paid as down payment before the project begins. We usually bill our services and
recognise turnover on an accrual basis, after the completion of identi®able stages of a project or
upon completion of the project as a whole.
39
Our Costs
Demerger.
E-services Costs
------- FY1999 ------
------- FY2000 ------
------- FY2001 ------
(S$'000)
(S$'000)
(S$'000)
Cost of Products Sold
Changes in Stocks of Finished Goods
1,464
794
(912)
(12,962)
(22,518)
(16,985)
(1,532)
(3,869)
(5,109)
(154)
(495)
(1,768)
Sales Commission
(58)
(142)
(166)
Freight & Delivery
(14)
(64)
(55)
(400)
(723)
(1,386)
Ð
3
186
(13,656)
(27,014)
(26,195)
Purchases
Personnel Expenses
Selling and Administrative Expenses
Depreciation
Other Operating Expenses
Other Income
Total
Our e-services costs comprise mainly costs of IT Products used in the provision of information
technology, communication and e-commerce solutions and services. Our costs of IT Products
accounted for approximately 68.3 per cent. of our total e-services costs in FY2001.
The other primary expense incurred in our e-services division relates to salaries and related bene®ts of
the employees of each of Infonet and Aspiren. Our e-services personnel expenses accounted for
approximately 19.5 per cent. of our total e-services costs in FY2001. The remaining costs relate to
depreciation of hardware, the licensing of software and software development and administrative
expenses.
Taxation
We are subject to Singapore tax regulations as our e-services currently operates in Singapore. Any
change in tax laws and regulations or the interpretation or application thereof may adversely affect
our e-services earnings and tax liabilities.
The taxation charge of our e-services division is higher than that arrived at by applying the respective
statutory tax rate to the pro®t of the individual companies in the Proforma Group principally because
of certain expenses not deductible for tax purposes.
40
REVIEW OF FINANCIAL RESULTS
Distribution business
Proforma FY2001 Compared to Proforma FY2000
Turnover
Our turnover from distribution increased by about 1.6 per cent. or S$17.0 million from S$1,063.3 million
in FY2000 to S$1,080.3 million in FY2001. The increase was mainly due to higher net turnover
contributions of about S$103.8 from our operations in China and Australia, which was partially offset
by a decrease in turnover of about S$70.8 million from our operations in Hong Kong. As our joint
venture in China commenced operations in January 2000, the increase in our turnover from China in
FY2001 re¯ected a full year of operations compared to only six months of operations in FY2000.
Turnover from our Australia operations increased as a result of an expansion in the range of
products offered to our Australian resellers and the addition of a new distribution centre in Perth,
Western Australia. Our Hong Kong operations discontinued its sales of certain electronic
components during FY2001 to streamline our business, resulting in a reduction in turnover
contribution from Hong Kong.
The increase in our turnover from distribution by about 1.6 per cent. or S$17.0 million from
S$1,063.3 million in FY2000 to S$1,080.3 million in FY2001 was also due to increase in sales of
printers, storage products, servers, plotters, supplies and computer networking products of
approximately $118.0 million. However, the increase in our distribution turnover was diminished by
decrease in turnover from personal computers, monitors and scanners of approximately $101.0
million.
Expenses
Expenses for our distribution division increased by approximately 1.3 per cent. or S$13.6 million from
S$1,050.6 million in FY2000 to S$1,064.2 million in FY2001. The increase was primarily due to the
increase in our costs of products sold and personnel expenses, which represented approximately
96.4 per cent. and 1.6 per cent. respectively of our expenses in FY2001. Our costs of products sold
increased approximately S$7.6 million or approximately 0.8 per cent. in FY2001, which was in line with
the increase in our distribution turnover for the period, while our personnel expenses increased
approximately S$3.2 million as a result of increase in head count as we expanded our operations in
the Asia Paci®c region. Our joint venture in China commenced operations in January 2000 and as
such, its expenses in FY2001 re¯ected its ®rst full year costs of operations compared to only six
months in FY2000.
Pro®t before taxation increased from S$10.7 million in FY2000 to S$11.7 million in FY2001. The
increase was mainly due to the increase in turnover discussed in the preceding paragraphs.
However, expenses did not increase in tandem with turnover, resulting in a net increase in pro®t
before taxation.
Our pro®t after taxation from our distribution division for FY2001 was approximately S$7.8 million
compared to approximately S$6.7 million in FY2000. Taxation expenses for FY2001 were about
S$4.0 million or approximately 34.0 per cent. of our pro®t before taxation compared to about
S$4.0 million or approximately 37.2 per cent. of our pro®t before taxation in FY2000. The difference
in the effective tax rates was due to the effect of consolidation of subsidiaries from different tax
jurisdictions.
41
Turnover
Turnover from our distribution division increased by about 14.7 per cent. or approximately
S$136.1 million from S$927.2 million in FY1999 to S$1,063.3 million in FY2000. The increase in
turnover was mainly due to the contributions from our operations in China, which commenced
operations in January 2000. Our joint venture in China generated a turnover of approximately S$91.9
million in FY2000. The increase in our turnover from distribution was mainly attributable to increase in
turnover from our operations in Singapore, Malaysia, Thailand, Indonesia and the Philippines, but
offset partially by a decrease in our turnover from Australia in FY2000 due to a change in product
mix offered in Australia. Certain OEM products manufactured by GES were eliminated from our
product range in Australia. However, new products were not introduced until the end of FY2000 to
replace those products removed from our Australian product range.
The increase in our distribution turnover by about 14.7 per cent. or approximately S$136.1 million from
S$927.2 million in FY1999 to S$1,063.3 million in FY2000 was also due to increase in sales of most of
our products such as personal computers, monitors, scanners, printers, servers, plotters, supplies and
computer networking products of approximately S$142.0 million. However, the increase in our
distribution turnover was moderated by a decrease in turnover from component products such as
storage products of approximately S$5.9 million.
Expenses
Expenses for our distribution division increased by approximately 14.1 per cent. or S$129.5 million
from about S$921.1 million in FY1999 to about S$1,050.6 million in FY2000 due primarily to
increases in our costs of products sold and personnel expenses. In FY2000, our costs of products
sold and personnel expenses accounted for approximately 96.9 per cent. and 1.3 per cent.
respectively of our expenses for the period. Our costs of products sold increased approximately
S$130.3 million or 14.7 per cent. compared to FY1999, which was in line with the increase in our
distribution turnover. Our personnel expenses increased approximately S$2.1 million as a result of
increased head count as we expanded our operations in the Asia Paci®c region. Our joint venture in
China commenced operations in January 2000 and the expenses re¯ect its costs of operations for the
®ve months to 30 June 2000.
Pro®t before taxation increased from S$4.4 million in FY1999 to S$10.7 million in FY2000. The
increase in pro®t before taxation was mainly due to the increase in margin contributions from sales
of our products such as personal computers, monitors, scanners, printers, servers, plotters, supplies
and computer networking products, as our expenses increased at a slower rale compared to our
turnover.
Pro®t after taxation from our distribution division for FY2000 was S$6.7 million compared to S$2.9
million for FY1999. Taxation expenses for FY2000 were S$4.0 million or approximately 37.2 per cent.
of pro®t before taxation compared to S$1.5 million or approximately 33.3 per cent. of pro®t before
taxation in FY1999. The difference in the effective tax rates was due to the effect of consolidation of
subsidiaries from different tax jurisdictions and an adjustment in FY1999 for an over-provision
in FY1998 of S$0.4 million and an adjustment in FY2000 for an under-provision in FY2000 of
S$0.2 million.
42
E-services business
Turnover
Our turnover from e-services decreased slightly to S$27.0 million in FY2001 from S$28.7 million in
FY2000, as a result of a decrease in service contracts recognised during the year and the
repositioning of our e-services business away from lower margin contribution business including
system integration tender business. We have less system integration contracts in FY2001 compared
to FY2000.
Expenses
Expenses from our e-services division decreased from S$27.0 million in FY2000 to S$26.2 million in
FY2001. The decrease was primarily due to the decrease in costs of IT products used by S$3.8
million, in line with the decrease in our e-services turnover. However, the decrease in costs of IT
products was offset by an increase in our personnel expenses. Personnel expenses increased by
S$1.2 million as a result of an increase in head count by about 18.9 per cent..
Pro®t before taxation decreased from S$1.3 million in FY2000 to S$0.4 million in FY2001. The
decrease was mainly due to the decrease in turnover noted above and the share of results of
associates. However, expenses did not decrease in tandem with the decrease in turnover resulting in
a net decrease in pro®t before taxation. Our share of losses from our associated companies amounted
to S$0.3 million in both FY2000 and FY2001.
Pro®t after taxation in our e-services division was S$0.2 million for FY2001 compared to a pro®t of
S$1.0 million for FY2000 as a result of reductions in our e-services margins when our costs did not
decrease in line with our turnover. Taxation expenses for FY2001 were S$0.2 million or approximately
31.3 per cent. of pro®t before taxation compared to S$0.3 million or 25.5 per cent in FY2000. The
difference in the effective tax rates was due to the effect of our share of associated company losses,
which reduced our pro®t before taxation by S$0.3 million, thereby increasing our effective tax rate as a
percentage of pro®t before taxation.
Turnover
Our turnover from our e-services division increased by S$15.0 million, or 109.7 per cent., to
S$28.7 million in FY2000 compared to S$13.7 million in FY1999, as we began to realise turnover
from our expansion into systems con®guration, integration and management.
Expenses
Expenses from our e-services division increased from S$13.7 million in FY1999 to S$27.0 million in
FY2000. The increase was primarily due to the increase in our costs of IT Products, which increased
by S$10.2 million or 88.9 per cent. in line with increase in our e-services turnover. Our personnel
expenses increased by S$2.3 million in FY2000 as we expand our number of employees to extend
our scope of services provided. Head count increased approximately 23.2 per cent. in FY2000.
Pro®t before taxation increased from S$0.1 million in FY1999 to S$1.3 million in FY2000. The increase
in pro®t before taxation was mainly due to increase in turnover as we expand into systems
con®guration, integration and management. However, expenses did not increase in tandem with
turnover, resulting in a net increase in pro®t before taxation.
43
Pro®t after taxation in our e-services division was S$1.0 million for FY2000 compared to a pro®t of
S$0.1 million for FY1999 as a result of an increase in the turnover in our e-services division. Taxation
expenses for FY2000 were S$0.3 million or approximately 25.5 per cent. of pro®t before taxation and
share of results of associated companies, compared to S$0.02 million or approximately 25.8 per cent.
of pro®t before taxation in FY1999. The marginal difference in the effective tax rates was due to the
effect of certain expenses not deductible for tax purposes.
REVIEW OF FINANCIAL POSITION
Non-Current Assets
Fixed Assets
Our ®xed assets comprise mainly computer systems and software including DigilandCommerce.com,
of®ce equipment, furniture, ®ttings and renovation. As at 30 June 2001, the net book value of our ®xed
assets was approximately S$10.0 million. The net increase of S$1.0 million from that as at 30 June
2000 arose from additions in furniture, ®ttings and renovations as a result of increase in the number
of distribution centres in Perth, Western Australia and Cebu, the Philippines.
The net book value of our ®xed assets increased from S$8.9 million as at 30 June 1999 to S$9.0 million
as at 30 June 2000. The slight net increase in ®xed assets as at 30 June 2000 was mainly due to a net
increase in computer systems and software after deducting depreciation expense.
Investments
Our investment comprises investment in e-station Pte Ltd (`è-station''), a joint venture between
Starhub Pte Ltd and ourselves. In FY2000, we invested approximately S$1.4 million in e-Station.
However, our investment was reduced to S$0.7 million as at 30 June 2001 by our share of
accumulated losses for that period.
Other Investments
Other investments referred to investment in quoted and unquoted equity shares. These investments
were subsequently sold in FY2000.
Intangible Assets
Our intangible assets comprise goodwill.
Goodwill arose from the purchase of certain of our subsidiaries from the GES Group, namely Digiland
Australia, Digiland Malaysia, Digiland Thailand and Trans Europe. We acquired Digiland Australia,
Digiland Malaysia and Digiland Thailand based on their respective audited net tangible asset values
(``NTA'') as at 1 July 1998. We acquired Trans Europe from GES at GES's original cost of investment
pursuant to the Demerger. As some of these companies had a negative NTA, the consideration for
them was agreed at a nominal sum. The difference between our consideration and these companies
respective NTAs resulted in the recording of a goodwill in our books on consolidation.
In accordance with our accounting policy, we amortise our goodwill on acquisition over a period of 20
years, during which the bene®ts are expected to arise. As at 30 June 2001, goodwill amounted to
S$2.6 million. The slight increase of S$0.1 million from FY2000 was due to goodwill arising from the
purchase of our China distribution operations.
Goodwill decreased from S$2.6 million as at 30 June 1999 to S$2.5 million as at 30 June 2000 as a
result of amortisation of goodwil during the year.
44
Current Assets
Our current assets comprise mainly cash and ®xed deposits, stocks, trade debtors, and other debtors,
deposits and prepayments.
Total current assets increased by S$47.4 million from S$246.5 million as at 30 June 2000 to
S$293.9 million as at 30 June 2001:±
.
Cash and ®xed deposits increased by S$7.0 million from S$25.1 million as at 30 June 2000 to
S$32.1 million as at 30 June 2001 mainly due to increase in cash from operations.
.
Stocks increased from S$72.9 million as at 30 June 2000 to S$86.9 million as at 30 June 2001 due
to increase in the range of products we offer to our customers. Average stocks turnover days was
30 days during this period.
.
Trade debtors increased approximately S$15.5 million from S$120.9 million as at 30 June 2000 to
S$136.4 million as at 30 June 2001. The payment terms we provide to our customers range from
cash on delivery to 60 days credit. Our average debtors' turnover days during this period was
45 days. Although our average debtors' turnover days increased from that of FY2000 at 40 days,
our provision for doubtful debt remained fairly stable at S$3.6 million as at 30 June 2001.
.
Due from af®liated companies (trade) increased approximately S$3.3 million from S$16.8 million as
at 30 June 2000 to S$20.1 million as at 30 June 2001. The amount due from af®liated companies
arose from sales to our local partners who manage our distribution centres in Indonesia and
Vietnam. The increase in balance is mainly due to increase in balance outstanding arising from
increase in sales to our local business partners.
.
Other debtors, deposits and prepayments increased from S$10.5 million as at 30 June 2000 to
S$18.1 million as at 30 June 2001 due to increase in prepayment to suppliers for products.
Total current assets increased by S$73.6 million from S$172.9 million as at 30 June 1999 to
.
Cash and ®xed deposits increased by S$15.8 million from S$9.3 million as at 30 June 1999 to
S$25.1 million as at 30 June 2000 mainly due to increase in cash from operations and increase in
®xed deposits.
.
Stocks increased from S$56.9 million as at 30 June 1999 to S$72.9 million as at 30 June 2000 due
to increase in sales and the increase in range of products offered throughout the countries in which
we operate. Average stocks turnover days was 26 days during this period.
.
Trade debtors increased approximately S$36.1 million from S$84.8 million as at 30 June 1999 to
S$120.9 million as at 30 June 2000 due to increase in sales and increase in new jurisdiction in
which we operate in the second half of FY2000. The increase in trade debtors was mainly due to
the contributions from our operations in China, which commenced operations in January 2000. Our
average debtors' turnover days during this period was 40 days.
.
Due from af®liated companies (trade) increased approximately S$4.3 million from S$12.5 million as
at 30 June 1999 to S$16.8 million as at 30 June 2000. The amount due from af®liated companies
arose from sales to our local partners who manage our distribution centres in Indonesia and
Vietnam. The increase in balance is mainly due to increase in balance outstanding arising from
increase in sales to our local business partners.
.
Other debtors, deposits and prepayments increased from S$6.5 million as at 30 June 1999 to
S$10.5 million as at 30 June 2000 due to increase in prepayment.
45
Current Liabilities
Our current liabilities comprise bank overdrafts, short term bank loans, trade creditors, trade bills
payable, other creditors and accruals, provision for taxation and current portion of hire purchase
creditors.
Total current liabilities increased by S$9.7 million from S$161.9 million as at 30 June 2000 to
.
Bank overdrafts and short term bank loans increased from S$15.1 million as at 30 June 2000 to
S$21.9 million as at 30 June 2001 as we raised additional working capital to repay creditors.
Additional working capital was required as we paid our creditors faster than we collect our debts
so as to take advantage of certain prompt payment discounts.
.
Trade creditors and trade bills payable decreased from S$70.4 million as at 30 June 2000 to
S$56.9 million as at 30 June 2001 due to early payment for most of our purchases to take
advantage of prompt payment discounts. Depending on our cash ¯ows and agreements with
suppliers, from time to time and on a case by case basis, we may pay our suppliers before the
due date for payment of certain purchases to take advantage of certain prompt payment
discounts.
.
Balances due to Proforma GIL Group increased from S$63.8 million as at 30 June 2000 to S$72.7
million as at 30 June 2001 mainly due to increase in our working capital loans from the Proforma
GIL Group. Balances due to Proforma GIL Group comprise both trade and non-trade balances
owing to the Proforma GIL Group. We intend to repay approximately S$47 million of the
outstanding balance prior to the Demerger. The remaining balance owing to the Proforma GIL
Group will be repaid as and when they fall due.
.
Other creditors and accruals increased from S$6.5 million as at 30 June 2000 to S$10.2 million as
at 30 June 2001 due to increases in deposits from our e-Services customers and increase in
accrued expenses.
.
Provision for taxation increased from S$5.4 million as at 30 June 2000 to S$9.5 million as at 30
June 2001 due to increase in provision for tax during the year. The tax provision was computed
by applying the respective statutory tax rate to the pro®t of individual companies in the Porforma
Digiland Group less losses arising in subsidiaries which cannot be set off against pro®ts of other
subsidiaries and expenses not deductible for tax purposes.
Total current liabilities increased by S$59.1 million from S$102.8 million as at 30 June 1999 to
.
Bank overdrafts and short term bank loans increased from S$4.2 million as at 30 June 1999 to
S$15.1 million as at 30 June 2000 due to increased working capital requirements of our Proforma
Group owing to the higher sales levels achieved during the year.
.
Trade creditors and trade bills payable arose as a result of our purchases from our suppliers. We
usually receive credit terms of 30 to 60 days from our suppliers. Trade creditors and trade bills
payable increased from S$51.7 million as at 30 June 1999 to S$70.4 million as at 30 June 2000
in line with the increase in our stocks during the same period.
.
Balances due to Proforma GIL Group increased from S$39.4 million as at 30 June 1999 to S$63.8
million as at 30 June 2000 mainly due to increase in working capital loans from the Proforma GIL
Group.
.
Other creditors and accrual increased slightly from S$5.9 million as at 30 June 1999 to
S$6.5 million as at 30 June 2000 due to increase in deposits from our e-Services customers and
accrued expenses.
.
Provision for taxation increased from S$1.5 million as at 30 June 1999 to S$5.4 million as at
30 June 2000 due to increase in tax provision from certain of our subsidiaries with better
performance and an adjustment in FY2000 for an under-provision of S$0.2 million.
46
Other Non-Current Liabilities
Our non-current liabilities comprise deferred tax and borrowings (including hire purchase ®nancing and
long term bank loans).
Total non-current liabilities decreased from S$1.6 million as at 30 June 2000 to S$1.0 million as at 30
June 2001 mainly due to repayment of hire purchase loan and reduction in long term loans.
Total non-current liabilities increased from S$1.0 million as at 30 June 1999 to S$1.6 million as at 30
June 2000 mainly due to increase in hire purchase loan.
Shareholders' Equity
Shareholders' equity increased from S$78.4 million as at 30 June 1999 to S$126.9 million as at
30 June 2001 due to retained pro®ts accumulated over the period and increased in paid up capital
by S$37.0 million.
We have assumed that Digiland has been operating independently from the GIL Group since 1 July
1998 and that the capitalisation of loan due from the GIL Group of approximately S$42.5 million and
the injection of cash of approximately S$32.0 million from GIL Group for shares in Digiland took place
on 1 July 1998 pursuant to the Demerger. Share premium of S$5.0 million arose from the above
proforma adjustments. Please refer to the Accountants' Report on pages 100 to 137 of this
Document for details.
Reserves
Our reporting and functional currency is the Singapore dollar. As most of our subsidiaries operate
overseas and use their respective local currency as their reporting currency, a foreign currency
translation reserve is created when we translate our subsidiaries' ®nancial statements to Singapore
dollars at each reporting date.
The ¯uctuations in our translation reserve re¯ects the ¯uctuations of our subsidiaries' reporting
currency against the Singapore dollar.
Minority Interests
Minority interests re¯ects the interests of minority shareholders of certain of our subsidiaries, including
Trans Europe, Digiland Indonesia, Digiland Philippines and Digiland China.
Minority interests increased from S$2.4 million as at 30 June 1999 to S$7.6 million as at 30 June 2001
owing to the increased pro®tability of certain of our subsidiaries.
47
LIQUIDITY AND CAPITAL RESOURCES
Liquidity and cash ¯ows
Our cash generated from operations is mainly from our IT Products distribution business. Our principal
uses of cash have been for meeting our purchases and operating expenses.
Demerger.
The following table set forth a condensed summary of the our proforma consolidated statement of
cash flows for the periods indicated:±
--------- Financial Year ended 30 June --------1999
(S$'000)
2000
(S$'000)
2001
(S$'000)
Condensed summary of cash ¯ows
Net cash (used in)/generated from operating activities
Net cash used in investing activities
Net cash generated from ®nancing activities
Effects of exchange differences
Net increase in cash and cash equivalents
(20,146)
1,324
4,210
(9,276)
(1,260)
(4,102)
32,232
19,352
5,885
3
(433)
(319)
2,813
18,983
5,674
Net cash generated from operating activities
We have net cash ¯ow generated from operating activities of approximately S$4.2 million and
S$1.3 million in FY2001 and FY2000 respectively. The cash ¯ow generated from operating activities
was largely attributable to increase in trade balances due to the Proforma GIL Group. We have net
cash used in operating activities of approximately S$20.1 million in FY1999 as a result of an increase
in inventory purchases and slow down in trade debt collections.
Our net cash used in investing activities were S$4.1 million in FY2001, S$1.3 million in FY2000, and
S$9.3 million in FY1999. The net cash used in investing activities in FY2001 and FY2000 was mainly
due to purchases of ®xed assets such as computer systems and software and furniture, ®ttings and
renovations during the period. The S$9.3 million net cash used in investing activities in FY1999 was
mainly due to acquisition of subsidiaries during the year.
Our net cash generated from ®nancing activities were S$5.9 million in FY2001, S$19.4 million in
FY2000 and S$32.2 million in FY1999. The cash generated from ®nancing activities in FY2001 were
mainly due to the net increase in ®nancing from short-term loans from third party ®nancial
institutions of approximately S$5.5 million. In FY2000, our net cash generated from ®nancing
activities of S$19.4 million was mainly due to the issuance of some of our shares to certain
members of our management for cash and contributions by minority shareholders in certain
subsidiaries of approximately S$4.3 million and ®nancing from short-term loans from third party
®nancial institutions amounting to approximately S$14.3 million. Our proforma consolidated cash
¯ows assumed that $32.0 million was injected by the GIL Group pursuant to the Demerger was
completed in FY1999 thus resulting in net cash generated from ®nancing activities in FY1999 of
S$32.2 million. Please refer to details of changes in our share capital on page 101 of the
Accountants' Report.
Effect of exchange differences
Effect of exchange differences relates to the translation of foreign currency balances at each balance
sheet date. The year to year changes re¯ect the ¯uctuations of certain of our subsidiaries' reporting
currency against the Singapore dollar.
48
Capital resources
We have historically ®nanced our business through a combination of cash ¯ow from operations,
shareholders' equity, retained earnings, bank borrowings, shareholder's loans and trade credit from
suppliers. As at 30 June 2001, on a proforma consolidated basis, our total borrowings amounted to
approximately S$110.8 million. Of our total borrowings, approximately S$72.7 million was balances
due to the Proforma GIL Group. Please refer to ``Transactions with Af®liates'' on pages 87 to 93 of
this Document for details. As at 30 June 2001, our gearing ratio was 0.87 times.
As at 30 June 2001, we have short term credit facilities comprising revolving short term bank loans,
bank overdrafts, bill payable, letters of credit and trust receipts amounting to S$38.0 million. In
addition, we have hire purchase obligations amounting to S$0.9 million. These facilities are subject
to periodic review and renewal at the respective ®nancial institution's discretion. We have been able
to service our interest commitments and repay any term loans they were due on a timely scheduled
basis.
Our banking facilities to one of our subsidiary companies are secured on ®xed deposits of the
subsidiary and certain of our banking facilities are guaranteed jointly and severally by our Company
and our joint venture partners.
Historically, we have depended on GIL and GES for funds made available through banking facilities
guaranteed by GIL and GES. This source of debt ®nancing comprises guaranteed bank overdrafts,
bills payable and short-term loans with banks in Singapore (i.e. DBS Bank, Deutsche Bank and UOB
(formerly OUB)) which as at 30 June 1999, 2000 and 2001 stood at S$9.7 million, S$15.5 million and
S$20.9 million, respectively. Each of DBS Bank, Deutsche Bank and UOB has informed us that they
are prepared to provide equivalent debt ®nancing to us without the requirement of guarantees from
GIL or GES on the condition of completion of our listing on the SGX-ST. In addition, OCBC has
agreed to provide us with new facilities of up to S$15.0 million. We have undertaken with GIL and
GES to discharge them from their guarantees within six months of the listing of our shares on the
SGX-ST and to indemnify them against any amounts that may arise from any such bank facilities.
Following the Demerger, we intend to operate on an arm's-length basis with GES and GIL, and such
support through these various ®nancing mechanisms may not be available on the same terms or at all.
We will therefore need to fund our working capital needs through other sources. We envisage that we
will require additional sources of ®nancing to meet our current and future ®nancing requirements,
which we expect to be able to satisfy through additional debt ®nancing arrangements from the
banks with which we have our existing debt facilities discussed above. However, we do not have a
commitment from any of these banks to provide such additional debt facilities and we cannot be
certain that such banking facilities will be made available to us at commercial interest rates or at all.
In addition, if we are able to secure such additional debt facilities, we anticipate that the additional
interest expense may have an impact on our operating results.
From time to time we may acquire or make investments in related businesses or establish joint
ventures or strategic partnerships as part of the expansion of our regional distribution network or
where we believe it will complement our current and future business. Some of these acquisitions or
investments could be material. However, we have no speci®c agreements or understandings with
respect to any material acquisition or investment at this time.
As at 30 June 2001, our proforma consolidated cash and cash equivalents amounted to S$29.9 million.
We believe that the capital resources we expect to be available at the conclusion of the Demerger,
including the S$32.0 million cash injection from the Demerger and the new bank lending facilities we
intend to establish, would be suf®cient to ®nance our present working capital requirements.
49
In¯ation
In¯ation has not had a material adverse effect on our revenue, operating results or balance sheet
items on a proforma consolidated basis for the periods under review.
Foreign Currency Exposure
Our reporting and functional currency is the Singapore dollar.
We usually purchase the products we distribute within the relevant jurisdiction (except Indonesia and
Vietnam, where products are sourced in Singapore) and pay for such products in the local currency.
We usually sell our products at a price ®xed in the local currency. For the purposes of our reported
consolidated ®nancial results, we convert all of these transactions into Singapore dollars and our
results of operations re¯ects the impact of ¯uctuations in exchange rates. If Singapore dollar
appreciates against US dollar, there will be a favourable impact on our ®nancial results. On the other
hand, an appreciation of US dollar against Singapore dollar will have an adverse impact on our
®nancial results.
In Singapore, for the year ended 30 June 2001, approximately 29.0 per cent. of our proforma sales
transactions were denominated in US dollars and 36.0 per cent. of our proforma purchase
transactions were denominated in US dollars. All other transactions are denominated in the local
currency of the countries we operate in. For this exposure in Singapore, we have hedged, and will
continue to hedge, substantially all of our foreign exchange exposure by entering into forward
foreign exchange contracts.
Our foreign exchange gains/(losses) for the last three ®nancial years are shown below:±
Foreign exchange gain/(loss)
FY1999
FY2000
FY2001
(S$'000)
(S$'000)
(S$'000)
695
1,011
(439)
In FY1999 and FY2000, the Singapore dollars appreciated against the US dollars resulting in a net
foreign exchange gain during the two ®nancial years. In FY2001, the US dollar appreciated against
the Singapore dollar resulting in a net foreign exchange loss during the year.
50
OUR PROFORMA GROUP
INTRODUCTION
Our Company was incorporated in Singapore on 25 January 1994 under the Companies Act. Our
registered of®ce is located at 14 Sungei Kadut Avenue, Singapore 729650. We set out below a brief
description of the corporate history and business of our Proforma Group.
HISTORY
The distribution operations of the GIL Group began with the export of computer products
manufactured by the GIL Group in 1987. Until June 1990, the distribution operations of the GIL
Group were carried out in Singapore and undertaken through GES (a wholly-owned subsidiary of GIL).
In 1990, GES expanded its distribution operations to Malaysia through Digiland Distribution (M) Sdn.
Bhd. (``Digiland Malaysia''). In 1993, distribution operations were further expanded to Australia and
Thailand through joint ventures with local business partners to form Digiland Pty Ltd (``Digiland
Australia'') in Australia and Digiland (Thailand) Co., Ltd. (``Digiland Thailand'') in Thailand.
In early 1994, our Company was set up to take over the Singapore-based distribution operations from
GES so as to allow the GES Group to concentrate on the regional distribution of computers and
computer peripheral products. Later in August 1994 GES expanded its distribution operations to
Vietnam. This was followed by an expansion into Indonesia in January 1995.
Due to local law restrictions then existing in Vietnam and Indonesia prohibiting foreign ownership of
shares in locally incorporated companies involved in the distribution business, GES did not establish
local entities in these jurisdictions to serve the Vietnam and Indonesian markets. Instead, GES
incorporated Digiland Vietnam Pte Ltd (``Digiland Vietnam'') and Digiland Indonesia Pte Ltd
(``Digiland Indonesia'') in Singapore to serve these markets. The day-to-day operations in Vietnam
and Indonesia are conducted through local trading companies owned by our business partners in
those jurisdictions.
In 1998, GES expanded its distribution operations to the Philippines by entering into a joint venture
with shareholders of Microcircuits Systems International Inc to form MSI Digiland (Phils.), Inc.
(``Digiland Philippines'').
In February 1999, we launched both DigilandCommerce.com and DigilandMall.com. DigilandMall.com
Pte Ltd was incorporated in February 2000 to carry out our online retail operations under a separate
entity.
In May 1999, we acquired Digiland Vietnam and Digiland Indonesia from GES as part of an internal
group restructuring.
In August 1999, GES increased its shareholding in Digiland Thailand through the acquisition of the
remaining 53.0 per cent. stake in Digiland Thailand for an aggregate cash consideration of THB 11.2
million. Following the acquisition, Digiland Thailand became a wholly-owned subsidiary of GES.
In October 1999, we expanded our distribution operations into China by entering into a joint venture
agreement with Shanghai East China Computer Co., Ltd. (`ÈCC''). The joint venture, Shanghai ECCDigiland International Trading Co., Ltd. (``Digiland China''), was 52.5% owned by ourselves and
47.5% owned by ECC. Digiland China was subsequently incorporated in January 2000.
To enable us to establish our presence in China more quickly, we also entered into an agreement with
Shanghai East-China Computer Technology Co. Ltd. (`ÈCCT''), a subsidiary of ECC, in March 2000 to
carry out warehousing, delivery, logistics and after-sales services for Digiland China. This arrangement
allows us to capitalise on ECC's and ECCT's experience in the distribution business in China and on
ECCT's existing network of reseller customers and 13 distribution centres in China, and complements
our Proforma Group's international distribution network, experience and relationships.
51
Also in October 1999, we acquired a 51.9 per cent. stake in Trans Europe Computer Ltd (``Trans
Europe''), a company in the Hong Kong Special Administration Region, through the subscription of
an aggregate of 4.5 million new shares of HKD1.00 each in Trans Europe for an aggregate cash
amount of HKD4.5 million and the acquisition of an aggregate of 2.5 million shares of HKD1.00. The
stake in Trans Europe was transferred to GES subsequently. GES' shareholding in Trans Europe was
increased to 65.9 per cent. in June 2001 and as part of the Demerger, the Trans Europe shares were
transferred back to Digiland on 28 September 2001.
In FY 2000, Digiland Thailand, Digiland Philippines, Digiland Malaysia and Digiland Australia were
transferred from GES to Digiland as part of the GIL Group's rationalisation of its organisational
structure.
In May 2001, we increased our stake in Digiland Philippines to 87.9 per cent (pending regulatory
approval). Jimmy D. Go, Rosendo Go and Fernando King, directors and shareholders of MSI
Digiland (Phils), Inc, a subsidiary of our Company under the Digiland Group, were granted an option
on 1 October 2001 to subscribe for an aggregate of 1,142,217 ordinary shares of 100 Pesos each in
the capital of MSI Digiland (Phils), Inc. The options will vest on 1 July 2002 and will be exercisable for
®ve years thereafter. The exercise price per share will be as follows:±
(i)
between 1 July 2002 and 30 June 2004, 112.5 Pesos; and
(ii)
between 1 July 2004 and 30 June 2007, the value of NTA per share (based on the latest audited
accounts of MSI Digiland (Phils), Inc).
The e-services operations of the GES Group were originally conducted through Infonet. However, as
part of the restructuring, we acquired from GIL its shareholding in Infonet in June 2000. Presently, our
e-services division comprises Infonet and Aspiren. Aspiren was incorporated on 25 February 2000 to
carry out our e-commerce solutions business.
Our Proforma Group Structure and Group Companies
The chart below depicts the principal operating companies within our Proforma Group.
Digiland International
International Limited
Digiland
Limited
E-services
Infonet Systems and Services
Pte Ltd
(100%)
Aspiren Pte Ltd
(100%)
Distribution
Digiland Indonesia Pte Ltd
(51.0%)
Shanghai ECC-Digiland
International Trading Co., Ltd
(The People's Republic of China)
(52.5%)
MSI Digiland (Phils.), Inc.
(Philippines)
(87.9%)(2)
Digilandmall.com Pte Ltd
(100%)
Digiland Vietnam Pte Ltd
(100%)
Digiland (Thailand) Co., Ltd
(Thailand)
(100%)(1)
Digiland Pty Ltd
(Australia)
(100%)
Digiland Distribution (M)
Sdn. Bhd.
(Malaysia)
(100%)
Trans Europe Computer Ltd
(Hong Kong)
(65.9%)
Notes:±
(1) Five ordinary shares in the capital of Digiland (Thailand) Co., Ltd are held by local nominees of Digiland.
(2) Pending regulatory approval.
52
DISTRIBUTION DIVISION
The principal business of our distribution division is the wholesale distribution of IT Products. For
FY2001, proforma turnover for our distribution division totalled S$1,080.3 million and accounted for
approximately 97.6 per cent. of our total proforma turnover.
We distribute a wide range of products from over 30 different suppliers. Please refer to the section
entitled ``Suppliers'' for further details on our suppliers. Our customers include traditional dealers,
VARs, systems integrators, retail chains and original equipment manufacturers. Approximately 50 per
cent. of our reseller customers are traditional dealers, and we have business relationships with over
13,000 reseller customers across the Asia Paci®c region. Please refer to the section entitled `Àsia
Paci®c Reseller Customer Network'' for further details on our customers. A write-up on the
distribution industry can be found at Annex C of this Document.
Our distribution network comprises a total of 30 distribution centres across the Asia Paci®c region, 13
of which are operated directly and 17 of which are operated through our local business partners in
China, Indonesia and Vietnam. We also provide personal computer con®guration services in
Malaysia, the Philippines, Thailand and Vietnam and offer after-sales services in China, Indonesia,
Malaysia, Singapore, Thailand and Vietnam for some of the products we distribute.
Our wholesale distribution operations are carried out directly by Digiland in Singapore and through our
various subsidiaries overseas. We have overseas operations in Australia, China, Hong Kong, Malaysia,
the Philippines, Thailand, and distribute to Indonesia and Vietnam. Singapore remains our major
market, contributing approximately 30.9 per cent. of our total proforma consolidated distribution
turnover (on a proforma basis), followed by Hong Kong, contributing approximately 25.2 per cent.,
for FY2001.
Our regional network of distribution centres is displayed in the map found on the back cover of this
Document.
In February 1999, we launched a B2B web site, known as DigilandCommerce.com, to provide our
reseller customers with the ability to place orders 24 hours a day through the Internet.
DigilandCommerce.com enables our reseller customers to purchase our products on-line 24 hours a
day and also provides information on products, pricing and inventory levels, as well as real-time
personalised information such as status of credit, status of placed orders and invoice information.
As of 30 June 2001, we had over 3,800 registered users for DigilandCommerce.com in Singapore,
Australia, China, Malaysia, Thailand and the Philippines. In FY2001, approximately 40.0 per cent. of
the total proforma turnover of our distribution business with reseller customers was conducted over
the Internet.
On-line sales in Singapore accounted for approximately 70.0 per cent. of the total proforma turnover
for our distribution division in Singapore for FY2001. Our distribution business now involves taking
orders by telephone, facsimile, in person or on-line from our reseller customers and physically
ful®lling those orders through inventory maintained in our network of 30 distribution centres. We
believe we are one of the ®rst distributors to have a regional on-line distribution capability in the Asia
Paci®c region. We intend to extend our on-line distribution capabilities to the other countries in the
Asia Paci®c region where we currently operate by the end of 2003, where viable.
In February 1999, we also launched our retail consumer web site DigilandMall.com to serve the
consumer market in Singapore. We do not operate any retail shops but access our target market
through this web site. DigilandMall.com is a 24-hour virtual shopping mall providing consumers with
access to a variety of products including IT Products and consumer electronic products.
Whereas DigilandCommerce.com is an enhancement of our wholesale distribution network,
DigilandMall.com is a 24-hour shopping mall for the growing class of consumers who are ®nding the
Internet an agreeable commercial medium. The on-line retail business is carried out by our whollyowned subsidiary, DigilandMall.com Pte Ltd, as an arm of our distribution division.
53
DigilandMall.com contributed S$7.9 million to the proforma turnover for our distribution division for
FY2001.
The following table shows a breakdown of our proforma turnover by product category for our
distribution division for FY1999, FY2000 and FY2001:±
Proforma Turnover By Product Category For Proforma Digiland Group
---------------------------------------------- Year Ended 30 June -------------------------------------------------------- 1999 -----------(S$'000)
-------------- 2000 -------------
(%)
(S$'000)
(%)
-------------- 2001 ------------(S$'000)
(%)
Supplies
90,293
9.7
113,144
10.6
153,842
14.2
Printers
109,507
11.8
115,129
10.8
140,822
13.0
Personal Computers
193,401
20.9
249,480
23.5
170,187
15.8
Component (including storage products)
490,625
52.9
484,740
45.6
488,276
45.2
Monitors
23,732
2.6
33,642
3.2
13,200
1.2
Scanners
8,268
0.9
9,381
0.9
8,113
0.8
Servers
1,945
0.2
27,752
2.6
47,619
4.4
Plotters
1,773
0.2
5,665
0.5
8,931
0.8
Others
7,642
0.8
24,359
2.3
49,297
4.6
927,186
100.0
1,063,292
100.0
1,080,287
100.0
Total distribution turnover
The following table shows a geographical breakdown of our proforma turnover for our distribution
division for FY1999, FY2000 and FY2001:±
Proforma Turnover By Country For Proforma Digiland Group
---------------------------------------------- Year Ended 30 June -------------------------------------------------------- 1999 ------------
-------------- 2000 -------------
(S$'000)
(%)
359,576
38.8
361,900
34.0
334,489
30.9
Malaysia
38,139
4.1
45,905
4.3
46,690
4.3
Australia
111,460
12.0
86,003
8.1
135,917
12.6
Thailand
34,937
3.8
55,721
5.2
56,934
5.3
Vietnam
11,474
1.2
21,071
2.0
25,967
2.4
Indonesia
21,221
2.3
36,684
3.5
38,415
3.6
Philippines
15,343
1.7
21,154
2.0
23,898
2.2
Ð
0.0
91,871
8.6
145,755
13.5
Hong Kong
335,036
36.1
342,983
32.3
272,222
25.2
Total distribution turnover
927,186
100.0
1,063,292
100.0
1,080,287
100.0
Singapore (excludes e-services)
China
54
(S$'000)
(%)
-------------- 2001 ------------(S$'000)
(%)
ASIA PACIFIC RESELLER CUSTOMER NETWORK
We distribute IT Products wholesale to a network of over 13,000 reseller customers in nine countries
and territories in the Asia Paci®c region. Approximately 50 per cent. of our current reseller customers
are traditional dealers selling primarily to small and medium-sized businesses and home users of
computers. We are seeking to expand the categories of our networking reseller customers by more
aggressively focusing on VARs, systems integrators and franchised store operators and by
expanding our product lines to carry a more diverse range of peripherals and computer-related
electronic goods.
The following table shows a geographical breakdown of our reseller customers as at 30 June 2001:±
(Number of
Reseller customers)
Singapore
(%)
800
6.0
Malaysia
1,430
10.7
Australia
3,610
27.0
Thailand
1,490
11.1
Vietnam
420
3.1
Indonesia
1,050
7.9
Philippines
1,630
12.2
Hong Kong
470
3.5
China
2,480
18.5
Total
13,380
100.0
The number of reseller customers we have in each of the countries in which we operate depends on
factors including the size of the reseller customer market, the maturity of the IT Products distribution
market and the range of products we make available in the particular market.
PRODUCTS AND SERVICES
We distribute a wide range of IT Products from leading international manufacturers in the computer,
communications and electronics industries. We sell a range of IT Products, including personal
computers, notebooks, servers, printers, plotters, scanners, monitors, motherboards, storage
products, computer networking products and supplies such as ink cartridges, toners and special ®lm
and paper. Our primary suppliers include Adaptec, Apple, Compaq, Epson, Fujitsu, Hewlett Packard,
IBM, Maxtor, Sharp and Viewsonic. Our product assortments vary by market and the brand mix varies
from country to country.
Apart from wholesale product distribution, we also offer personal computer con®guration services and
after-sales services in certain countries.
55
SUPPLIERS
We have developed strong ties with our suppliers for our wholesale distribution operations. We
provide these suppliers with access to our reseller customer distribution network while reducing the
inventory, credit, marketing and overhead costs which might otherwise be incurred by them in
establishing direct relationships with our reseller customers. On average, our suppliers' credit terms
range from 30 to 60 days.
Our two principal suppliers, Hewlett Packard and IBM, together accounted for approximately 71.8 per
cent. of our proforma distribution turnover during FY2001 (61.4 per cent. FY2000). Hewlett Packard
and IBM accounted for 37.3 per cent. and 24.1 per cent., respectively, of our proforma distribution
turnover in FY2000 and 43.7 per cent. and 28.1 per cent., respectively, of our proforma distribution
turnover in FY2001.
We have entered into distribution agreements with many of the suppliers, including Hewlett Packard
and IBM, for our wholesale distribution operations. These agreements usually provide for nonexclusive distribution rights and often include territorial restrictions that limit the countries in which
we are permitted to distribute the products. The agreements are generally for a year, subject to
periodic renewal, and often contain provisions permitting termination by either party without cause
upon giving the prescribed notice. Most of the distribution agreements provide for notice periods of
either 30 or 60 days. These agreements contain automatic renewal clauses and as a matter of
course, these agreements are renewed yearly. To date, none of our principal suppliers has
terminated a distribution agreement with us or indicate an intention to do so.
The suppliers for our wholesale distribution operations generally provide product warranties for the
products we distribute and allow us to return defective products, including those that have been
returned to us by our customers. We do not independently provide any product warranties for the
products we distribute.
MARKETING
As of 30 June 2001, our wholesale operations had over 345 ®eld sales representatives across the Asia
Paci®c region. Our marketing teams are organised along brand and product lines with dedicated sales
personnel focusing on different product categories. These ®eld sales representatives are mainly
responsible for promoting sales growth and developing customer relationships.
Before the introduction of our B2B and ERP systems, our ®eld sales representatives spent a
signi®cant amount of time attending to queries from reseller customers on product speci®cations,
availability, pricing, delivery status, etc. All of this information is now available on our
DigilandCommerce.com web site and our reseller customers are able to access this information
themselves. This has enabled our sales representatives to focus more on innovative and creative
sales promotions as well as on developing both existing and new customer relationships for their
products.
From time to time, we conduct promotions either on our own or in conjunction with our suppliers,
offering discounts or gifts for selected items purchased. These promotions are typically advertised
on our DigilandCommerce.com web site. Generally, we receive reimbursements from suppliers for
promotional activities which advertise the products of such suppliers.
56
WEB SITES
DigilandCommerce.com
We believe that the ease and ef®ciency with which our reseller customers can execute purchase
orders on DigilandCommerce.com has provided us with a competitive advantage in the Asia Paci®c
region's IT Products and services distribution industry. Our reseller customers in each of Singapore,
Malaysia, Australia, the Philippines, China and Thailand can access localised versions of the
DigilandCommerce.com web site. A description of the capabilities and functions of
DigilandCommerce.com can be found at Annex E of this Document.
DigilandMall.com
DigilandMall.com is a web site tailored to appeal to the consumer market through which they can
purchase IT Products and other consumer electronic products on-line. DigilandMall.com incorporates
many of the browsing, searching, and product description features of DigilandCommerce.com but
also features more product information and promotional material and is more graphic intensive than
DigilandCommerce.com.
TECHNOLOGY
A component of our strategy is to apply existing technologies in novel ways to streamline our
distribution chain and deliver more ef®cient services to our customers while lowering our business
costs. The various features of our web sites are implemented using a combination of commercially
available and proprietary software components in a manner designed to meet our speci®cations and
the needs of our customers.
We reserve internal development of software for those components that are either unavailable on the
market or that have major strategic advantages when developed internally. Set out in Annex E of this
Document is a description of our MIS Infrastructural Links including a description of the functions of
MFG/PRO and DigilandQuikView.
INVENTORY MANAGEMENT
MFG/PRO and DigilandQuikView play an important role in our inventory management as they store
and provide information on our inventory on a real-time basis. This, together with our experience,
helps us to avoid carrying excess inventory and to ensure inventory is adequate to meet demand.
Inventory levels are monitored daily by product managers, who are able to respond by either
ordering more stock or, if necessary, by prompting sales representatives to encourage more sales of
certain stock.
We maintain an average 40-day inventory turnover for most of our products. We are committed to
improving our inventory management and operational ef®ciency.
Our purchase department will forecast future sales in consultation with our suppliers and our
management. We regularly monitor sales trends and stock levels to reduce excess inventory which
could result from changes in customer preferences or economic conditions and product
obsolescence as a result of rapid technological development. In addition, price protection and stock
rotation arrangements with our suppliers, described below, help reduce the risks associated with slow
moving or obsolete inventory. For the last three ®nancial years, our stock write-offs averaged S$0.5
million or 0.05% of our average annual turnover. We believe that, as a result of our demonstrated
ability to meet orders and to make timely delivery, our customers generally order inventory as and
when required, thus enabling them to reduce their own inventory costs.
We do not keep inventories of all products which we distribute exclusively through our on-line retail
operations. These products, which would not usually be carried by our wholesale operations, are
either held on a consignment basis or sourced from the relevant supplier or its agents as and when
they are required to ful®l an order.
57
PRICE PROTECTION
We believe that the risks associated with slow moving or obsolete inventory are substantially
mitigated by the price protection privileges provided by suppliers. It is the policy of most suppliers of
technology products to protect distributors, such as ourselves, who purchase directly from such
suppliers, from the loss in value of inventory due to new product roll-outs or supplier price
reductions. Under the terms of our distribution agreements or as a matter of industry practice, the
suppliers have agreed to credit us for declines in inventory value if we comply with certain
conditions such as reporting our outstanding inventory within a speci®ed period of time.
Historically, we have not experienced signi®cant losses due to obsolete inventory materially in excess
of established inventory reserves.
STOCK ROTATION
Some suppliers also extend to us stock rotation privileges for certain high-end products whereby we
are permitted to exchange a product if it becomes obsolete or is discontinued for the new versions of
these products.
PRODUCT DISTRIBUTION
One of our core strengths is our distribution network. Our network of over 13,000 reseller customers in
nine different countries and territories across the Asia Paci®c region are all linked by an organisational
and technological structure which we have developed to allow us to ef®ciently deliver the products
that we distribute and which has provided us with a foundation upon which to expand our business
into different ventures.
In Singapore, we make three deliveries a day to our reseller customers. All orders received through
DigilandCommerce.com in Singapore before 8:30 am on a work day are delivered that morning by
11:00 am, and all other orders received during of®ce hours on a work day are delivered to customers
either that day or the next working day, depending on when the order was placed. The objective is to
encourage our reseller customers to place orders with us on a daily basis, which helps our reseller
customers to minimise risk due to price ¯uctuations, reduces the need for them to ®nd storage
space for more than their daily needs, and enables us to maintain better control over our inventory.
In the other countries in which we operate, the number of deliveries per day differs depending on the
country. In respect of the larger countries we have arranged for our suppliers to deliver products we
have purchased directly to the relevant distribution centres. Such arrangements help us to improve
our delivery time as well as to overcome cultural and geographical barriers. Furthermore, we tend to
execute deliveries through third parties for our overseas operations, whereas in Singapore we usually
execute our deliveries ourselves.
CREDIT CONTROL
Our credit control procedures differ for our wholesale and retail operations. We accept only cheques
or credit card payments for our retail operations. In our wholesale operations, where we are able to
gauge a reseller customer's creditworthiness over the course of an on-going relationship, we offer
various credit terms to qualifying customers. In order to determine the appropriate credit terms, we
conduct a credit assessment for each of our reseller customers. Our credit control team in the
relevant jurisdiction, together with our credit control team in Singapore (where necessary), is
responsible for assessing the creditworthiness of our reseller customers.
We monitor closely our reseller customers' creditworthiness through our MFG/PRO system, which
provides information on each reseller customer's payment history and credit status. The average
number of debtor days in 2001 was approximately 45. Over the last three ®nancial years, the
average number of debtor days has remained steady notwithstanding the economic downturn in
Asia. We establish reserves for estimated credit losses in the normal course of business. Historically,
we have not experienced credit losses materially in excess of established credit loss reserves.
58
Our bad debts written off in the last three financial years are shown below:±
Bad debts written-off
Percentage of turnover
FY1999
FY2000
FY2001
(S$'000)
(S$'000)
(S$'000)
1,504
280
2,185
0.160%
0.026%
0.197%
Our bad debts written-off decreased from S$1.5 million in FY1999 to S$0.3 million in FY2000 due to
less doubtful debts being written off. Bad debts written-off increased from S$0.3 million in FY2000 to
S$2.2 million in FY2001 as we adopted more conservative credit control limits in light of the current
economic conditions and wrote off certain doubtful debts, previously provided for, but which we
deemed irrecoverable.
E-SERVICES DIVISION
Our e-services division provides a range of information technology, communication and e-commerce
solutions and services through our wholly-owned subsidiaries Infonet and Aspiren. In FY2001,
proforma turnover for our e-services division was S$27.0 million accounting for approximately 2.4
per cent. of our total proforma turnover for the year.
Information Technology and Communications Business
The information technology and communication solutions business is carried out by Infonet, which at
present, only operates in Singapore. This division employed over 115 employees as at 30 June 2001.
Established in 1984 as a data communication company, Infonet has developed into an information
technology and communication service provider providing a range of services including systems
integration services, voice, data and video communication solutions, network and network security
solutions, integrated call centre solutions and outsourcing services. Infonet provides corporate
clients with total information technology solutions including project initiation, system con®guration,
implementation and support. It also provides project management services on a turnkey basis for
large-scale projects.
Additionally, the maintenance and collection services for the warranty programmes of some of our
major suppliers are also outsourced to Infonet.
Through Infonet, we established a joint-venture company with Starhub Pte Ltd in Singapore, e-station
Pte Ltd (`è-station''), in October 1999 to carry on the business of providing Internet-based
entertainment, educational and recreational services in Singapore. We supply certain computers and
computer peripheral products to e-station for the purpose of its business.
E-Commerce Solutions Business
Our e-commerce solutions business is carried out through Aspiren, which at present operates only in
Singapore. Aspiren employed over 25 employees as at 30 June 2001. Aspiren is an e-commerce
solutions provider that targets clients seeking to engage in e-commerce either by establishing their
own e-commerce infrastructure or by accessing a fully-managed web hosting environment. Having
successfully launched and implemented our own B2B platform, Aspiren is able to use its experience
to assist clients in establishing their own e-commerce platform.
Apart from being an e-commerce solutions provider, Aspiren is also an order-processing service
provider which is able to support a client's e-commerce initiative with the necessary ``backroom
engine'' services, such as order processing and invoicing. Aspiren provides solutions and services
ranging from analysis of an e-commerce initiative, design and deployment of a web site to
integration with ERP software programmes and training and support services.
59
Furthermore, Aspiren is also an Application Service Provider providing access to e-commerce and
ERP software programmes to its clients. Aspiren's clients do not own the applications nor are they
responsible for the initial installation or the ongoing maintenance of the programmes. Aspiren's
clients access its remote centralised servers which host the various applications. Only the results
from the application are managed locally by Aspiren's clients. Such applications may be classi®ed
into three main categories, namely, applications which facilitate on-line services for retail, distribution
and manufacturing businesses.
COMPETITION
The industries in which we operate are rapidly evolving and highly competitive, and we expect
competition to intensify in the future. As we focus our efforts on building our Internet businesses, we
expect to face increased competition from other companies that have an established Internet
presence and from other companies which are expanding into our areas of operation and/or into the
Asia Paci®c region.
Competition for the Distribution Division
Our primary business, the wholesale distribution of IT Products in the Asia Paci®c region, is highly
competitive. Our chief competitors in the Asia Paci®c region in the IT Products wholesale distribution
industry are (i) SIS International, (ii) Ingram Micro, Inc., (iii) Tech Paci®c and (iv) ECS Holdings Limited.
In addition, we compete with IT Products manufacturers directly in instances where they have not
outsourced distribution to third parties as well as local distributors of IT Products in the countries in
which we distribute.
Despite the high level of competition in our industry, the barriers to entry are substantial. The capital
requirements to establish and maintain a distribution network are high. Further, a wholesale distributor
must also procure product distributorships and have a good working knowledge of the industry. We
believe that the principal competitive factors in the IT Products distribution market are industry
reputation, product range, product availability, convenience, price, accessibility, customer service,
speed and accuracy of delivery and credit availability.
We believe that being one of the ®rst wholesale distributors of IT Products in the Asia Paci®c region to
migrate our business on-line will give us a competitive advantage. We believe our adoption of Internetbased technology has allowed us to lower transaction costs by automating some customer service
functions and to strengthen and enhance the ef®ciency of our relationships with our reseller
customers. Our real-time on-line database allows our reseller customers to adjust and expand their
inventories directly within prescribed limits, giving them additional freedom to focus on sales and
marketing. We believe that the cost and expertise involved in developing the e-commerce and MIS
infrastructure we have established is another signi®cant barrier to entry.
Competition for the E-services Division
Competition in the Asia Paci®c region for our e-services businesses is intense. We are a relatively new
entrant to these ®elds, and many of our current and potential competitors have signi®cantly longer
operating histories and signi®cantly greater ®nancial, technical, marketing and other resources than
us. Principal competitors for our e-services businesses include telecommunications companies and
information technology consulting service providers.
Furthermore, there are a number of signi®cantly larger companies with whom we do not currently
compete as they do not presently offer the same or similar e-commerce solutions offered by us.
However, they could, with relative ease enter into direct competition with us in the future. We believe
that the competition in these areas will intensify in the future. New technologies and the expansion of
existing technologies may also increase the competitive pressures we face.
60
INTELLECTUAL PROPERTY
Domain Names
We have registered various Internet domain names which we consider important to our business,
including ``DigilandMall.com'' and ``DigilandCommerce.com'' in countries where we operate. We
have registered these Internet domain names in certain other countries where we intend to establish
on-line retail operations.
Trademarks and Service Marks
We intend to apply for registration of those trademarks and service marks which we consider
important to our business.
Insurance
We maintain insurance policies with independent third parties in respect of buildings, equipment and
inventory covering losses due to ®re, burglary and certain other risks. We also maintain insurance
policies covering goods-in-transit, money-in-transit, workmen's compensation claims, public liability
and ®delity guarantees. We do not maintain business interruption insurance and ``key man''
insurance. We intend to obtain ``key man'' insurance for our Managing Director. We consider our
insurance policies to be adequate and consistent with industry norms in the relevant jurisdictions in
which we have operations.
Employees
As of 30 June 2001, we had 723 employees. The following table summarises the geographic and
functional distribution of our full-time employees as at 30 June 2001:±
Singapore Malaysia Australia
Thailand
Hong Kong
Philippines
China(1) Total(2)
Sales and
Marketing
90
31
45
43
39
50
47
345
Engineering and
Information
Technology
83
8
8
10
5
27
11
152
Customer Support
50
6
13
22
7
12
10
120
Finance &
Administrative
27
12
10
13
9
22
13
106
250
57
76
88
60
111
81
723
Total
Notes:±
(1) These employees are not employed directly by Digiland China. They provide labour services to Digiland China pursuant to a
labour service contractual relationship between Digiland China and Shanghai Foreign Services Inc.
(2) Our local business partners in Indonesia and Vietnam employ their own staff directly.
We recognise the need for continued development and improvement of the skill level of our
employees. New employees undergo internal training on our MIS systems and company policies and
procedures. We also sponsor a variety of training programmes ranging from short courses to part-time
certi®cation courses. Our employees may also attend external courses, seminars and training to
improve their skills.
We provide our employees with a comprehensive bene®ts package including dental and medical
bene®ts.
Our future success will depend, in part, on our ability to continue to attract, retain and motivate highly
quali®ed technical and management personnel. Our employees are not represented by any collective
bargaining unit except for those employed by Digiland Australia. We have never experienced a work
stoppage due to a labour dispute. We believe our relations with our employees are good.
61
Distribution Centres
In the Asia Pacific region, we have a network of 30 distribution centres, 13 of which we operate
directly and 17 of which are operated through our local business partners in China, Indonesia and
Vietnam. Currently, we do not own any properties. The following table sets out brief details of the
properties we lease as at 30 June 2001:±
Location
Lease Held by
Area (Sq m)
Office/
Warehouse
Tenure
SINGAPORE
1. 14 Sungei Kadut Avenue
Singapore
Digiland
1,000
Lease to be entered
into pursuant to the
Digiland IPT Mandate
2. 71 Tuas Avenue 1
Singapore
Digiland
455
2 years ending January
2003
3. 20 Depot Road # 01-04
Singapore
Digiland
273
1 year ending January
2003
4. 6 Expo Court
Mt Waverly VIC 3149
Victoria, Australia
Digiland Pty Ltd
970
3 years ending
February 2005
5. Unit 8B
6-8 By®eld Road
North Ryde
New South Wales, Australia
Digiland Pty Ltd
582
3 years ending
September 2003
6. Unit 3
57 James Street
Fortitude Valley
Queensland, Australia
Digiland Pty Ltd
240
3 years ending
November 2003
7. Unit 1
19A Kind Edward Road
Osborne Park
Perth
Western Australia
Digiland Pty Ltd
439
3 years ending
May 2003
AUSTRALIA
MALAYSIA
8. # 02-00 Plaza Hamodal,
Lot 15, 1st & 2nd Floor,
Jalan 13/2
46200 Petaling Jaya
Sdn. Bhd.
1,880
2 years ending October
2002
THAILAND
9. 805 Moo 2, Nakara Building,
16th Floor, Srinakarin Road
Thailand
Digiland (Thailand) Co.,
Ltd.
905
3 years ending June
2004
MSI Digiland (Phils.) Inc.
574
5 years ending
September 2005
PHILIPPINES
10.
Lot # 1, Rosita's Compound,
Ouano Avenue Corner,
Circumferencial Road, New
Mandaue Reclamation Area,
Mandaue City, Cebu
62
Location
Lease Held by
11.
Topy II Building
No. 3 Economia St. II
Bagumbayan Libis, Quezon
City
Philippines
Area (Sq m)
Office/
Warehouse
3,500
Tenure
5 years ending April
2003/April 2005/June
2006
CHINA
12.
A, 4th ¯oor
No. 6 Building
Lot F7, Section F
350 Xi Ya Road
Wai Gao Qiao Free Trade Zone
Shanghai
International Trading Co.,
Ltd.
609
1 year ending
December 2002
HONG KONG
13.
Unit 2901-2911,
No. 1 Hung To Road,
Kwun Tong, Kowloon,
Hong Kong
Trans Europe Computer
Limited
1,035
3 year ending
September 2003
In China, Indonesia and Vietnam, our local business partners operate their own distribution facilities
including 13 distribution centres in China, two distribution centres in Indonesia and two distribution
centres in Vietnam.
We do not believe that we will have any dif®culty renewing any of the leases at market rates as and
when they fall due or, alternatively, ®nding alternative facilities.
Legal Proceedings
From time to time we may be subject to legal proceedings and claims in the ordinary course of our
business. Such legal proceedings or claims, even if not meritorious, could result in the expenditure of
signi®cant ®nancial and managerial resources. We are not currently aware of any legal proceedings or
claims that we believe will have, individually or in the aggregate, a material adverse effect on our
business, ®nancial condition or results of operations.
63
COMPETITIVE STRENGTHS
We believe we have the following competitive strengths:±
.
Industry Reputation. We have been in the wholesale distribution business for more than 10
years. We believe we have acquired a good reputation in the IT Products distribution industries
in many of the countries where we operate. Our reputation is strongest in Singapore, as
compared to the other countries in which we operate or to which we distribute. Singapore
accounted for approximately 30.9 per cent. of our total proforma distribution turnover in
FY2001. We believe that our established reputation will give us the competitive edge over our
competitors as we continue to expand and develop our regional network.
.
Established Regional Distribution Network. We distribute our products wholesale to a network
of over 13,000 reseller customers though our 30 distribution centres in the Asia Paci®c region. Of
these, approximately 6.0 per cent. are in Singapore, 27.0 per cent. in Australia, 18.5 per cent. in
China, 12.2 per cent. in the Philippines and 36.3 per cent. in the other ®ve countries where we
currently distribute, namely Indonesia, Vietnam, Malaysia, Hong Kong and Thailand. We have
actively sought to increase the number of reseller customers in our network which will help us
achieve economies of scale in the purchasing and distribution of our products. Over the past
four years we have increased the number of reseller customers in our network from
approximately 8,500 reseller customers in early 1999 to over 13,000 reseller customers today.
.
Wide Range of Products and Brands Offered to Our Customers. We distribute a wide range of
products (over 1,500 SKUs) and brands from over 30 international manufacturers. We are major
distributors for numerous international brands including Adaptec, Apple, Compaq, Epson,
Fujitsu, Hewlett Packard, IBM, Maxtor, Sharp and Viewsonic and ship products ranging from
personal computers, servers and notebooks to hard disks and other storage devices, printers,
monitors and other peripherals. We are therefore a one-stop shop for many of our reseller
customers.
Product assortments vary by market and the relative brand mix varies from country to country.
We are conscious of meeting the needs of our reseller customers and believe our ability to
continue to expand the range of products and brands offered is central to satisfying their
expanding requirements. Apart from product distribution, we also offer personal computer
con®guration services in some of the countries in which we operate. This allows many of the
personal computers we distribute to be assembled according to our customers' speci®cations
and market demand generally.
.
Relationships with Major Global IT Products Manufacturers. We believe we have established
good working relationships with our suppliers including a number of major global
manufacturers of IT Products.
We believe this is demonstrated by the fact that a number of our suppliers are expanding their
distribution arrangements with us, both in terms of the range and type of products distributed
and the geographical markets covered by such arrangements. We have also entered into
strategic distributorship arrangements with several of our important suppliers which will ensure
for our reseller customers a ready source of the products they need.
As the industry consolidates, some major global manufacturers, as part of their rationalisation
programme to consolidate the number of distributors they use in the Asia Paci®c region, have
begun to work with regional distributors over smaller distributors. We believe that with the
capabilities of a regional distributor, we will be able to provide our suppliers with a broad and
reliable distribution network and regular product sales information on sell-through to resellers
and/or customers. In addition, we received numerous awards from our suppliers over the years
for distribution excellence, including awards from Hewlett Packard and IBM. In 2001, we
received numerous awards from our suppliers including the Regional Wholesaler Award from
Hewlett Packard and the Top Distributor for Asia Paci®c for Year 2000 (IBM Harddisk Drives)
Award from IBM. We believe that our relationships with key product suppliers provide us with
an opportunity to expand our operations into other jurisdictions in the Asia Paci®c region where
those suppliers are also expanding into.
64
.
Distribution Infrastructure. We have established a modern and reliable distribution network,
which is also accessible through our online B2B distribution interface. We believe that a ``click
and mortar'' model is the way forward in the IT Products distribution industry. We have
therefore devoted substantial resources and management time, to developing modern
distribution centres where inventory levels and such stock related information can be monitored
and be made available on-line. In this way, we do our best to ensure the timely delivery of goods
to our network of reseller customers.
Our principal distribution centre in Singapore stocks over 1,500 SKUs and allows us to organise
the distribution of products to individual stores more efficiently and to combine the products of
multiple suppliers into custom orders for particular stores. It also provides our reseller customers
with a larger number of products to choose from when stocking their stores.
While our distribution centres in other countries stock varying numbers of products, we have
instituted our ful®lment system in each of our locations and believe it can be expanded as we
distribute more products in those areas. We believe that crucial to the success of our online
distributorship operations is the establishment of a modern and reliable distribution networks
and logistical support. To this end, our approach has been to establish the requisite distribution
networks and logistical support prior to launching our online operations in the relevant country
where we operate.
.
Commitment to the Internet. We believe the development of the Internet as a medium of
commerce in the Asia Pacific region has provided, and will continue to provide, a number of
new business opportunities and we are committed to pursuing those opportunities. We believe
we are one of the first wholesale distributors in the Asia Pacific region to have a regional online
B2B distribution capability and we will continue to deploy our B2B capability in the markets
where we operate. In addition, we believe our experience with DigilandCommerce.com will
allow us to generate additional revenue from the provision of information technology,
communication and e-commerce consulting services through Aspiren and Infonet.
DigilandCommerce.com contributed approximately 40 per cent. of our proforma turnover and
our e-services business contributed approximately 2.4 per cent. of our proforma turnover in
FY2001.
Furthermore, after initial establishment costs have been accounted for, we believe that operating
through the Internet will decrease our future operating costs and improve our future operating
margins.
.
Advanced MIS Infrastructural Links. Our e-commerce operations are supported by advanced
MIS infrastructural links which streamline the distribution chain and deliver more ef®cient
services to our customers while lowering our business costs. Our reseller customers who are
registered users of DigilandCommerce.com are able to check for available inventory on-line.
Store managers can also place orders to restock their shelves and track the receipt of product
deliveries on-line. We believe this provides us with more information on our customers' needs
and helps to ensure that fast selling items are regularly available.
65
INDUSTRY TRENDS
We believe that our business growth and prospects were driven by a number of favourable industry
trends:±
.
Growth in demand for IT Products in the Asia Pacific region. We believe that the growth in
demand for IT Products in the Asia Pacific region has been mainly driven by:±
.
growth in Asia Pacific economies;
.
implementations of information technology infrastructure by certain governments in the
Asia Pacific region;
.
the increasing availability of Internet services; and
.
increased penetration of IT Products in the Asia Paci®c region
We believe that our extensive network of resellers, e-commerce capability and geographic reach
in 11 countries and territories in the Asia Paci®c region place us in a good position to bene®t
from the growth in demand for IT Products in the Asia Paci®c region.
.
Increasing trend of Internet-based transactions. We believe that consumer lifestyles are being
transformed by the use of Internet. Individuals and businesses increasingly rely on the Internet
to access business information and conduct transactions.
As one of the ®rst distributors in the Asia Paci®c region with both an e-commerce B2B web site
for our reseller customers and a consumer-oriented B2C web site, we believe that we will be able
to bene®t directly from the growth of Internet-based transactions.
.
Increasing trend towards strategic alliance with vendors. We believe that IT Products
manufacturers are looking to reduce their operating costs and to achieve greater economies of
scale by reducing the number of product distributors who work with them. By deploying their
products through a smaller number of distributors who would then in turn sell these products
to their networks of reseller customers, IT Products manufacturers could concentrate more of
their resources on product development and design and marketing.
We believe that our extensive network of resellers and our geographical reach across the Asia
Paci®c region in 11 countries and territories would position us as one of the leading distributors
in the Asia Paci®c region.
.
Increasing trend towards outsourcing of e-services. We believe that more companies are
outsourcing non-core activities to reduce costs and improve productivity as it enables them to
focus their resources on their core business activities.
We also believe that the use of Internet as a strategic tool for reaching customers will result in
more companies establishing their own e-commerce platforms. As a part of the increasing trend
towards outsourcing, such companies may outsource the development and implementation to
companies such as our e-services businesses, Infonet and Aspiren. As a result, we believe that
our e-services business will be able to leverage on our experience in having successfully
launched and implemented our own e-commerce platform to attract customers seeking to
establish their own e-commerce platforms.
66
BUSINESS STRATEGY AND FUTURE PLANS
Our business strategy is to strengthen our competitive position as a leading wholesale distributor of IT
Products to reseller customers in the Asia Pacific region while developing and enhancing our eservices division to pursue other growth opportunities. In particular, we intend to:±
.
Expand Our Distribution Network. We are committed to expanding our network of reseller
customers through organic growth and mergers and acquisitions in the markets where we
currently operate and entry into new markets to extend our geographical reach. We have
expanded our network from 8,500 reseller customers in early 1999 to over 13,000 today.
Currently, approximately 50 per cent. of our reseller customers are traditional dealers selling
primarily to small and medium-sized businesses and home users. To increase our customer
base in our existing markets, we intend to increase not only the number of our traditional
dealers but also the number of reseller customer categories such as value-added reseller
customers, systems integrators and owners of retail chains to which we distribute computers
and related products. In addition, we plan to seek opportunities to expand our operations into
new markets. We believe that greater regional market coverage will allow us to bene®t from
greater cost economies as we increase the scale of our business and reduce our exposure to
individual market downturns. We may pursue growth opportunities in the rest of Asia through
strategic acquisitions and/or joint ventures with local partners.
.
Expand the Range of Products and Brands Offered to Our Customers. We intend to increase
the range of products and brands we offer to our reseller customers in order to achieve optimal
economies of scale and to encourage organic growth in the size of our customer network in the
markets where we currently operate. Many of the reseller customers in our network are
contemplating offering a new range of products to their customers, including an expanded
range of IT Products such as personal digital assistants. This will encourage our existing
reseller customers to use us as their one-stop shop for all their products.
.
Encourage Use of DigilandCommerce.com. We believe our online B2B distribution platform,
DigilandCommerce.com, allows us to deliver our products more quickly and efficiently to our
reseller customers. Through this platform, we are able to reach a greater number of reseller
customers without significant additional expenditure for each new reseller customer. We believe
that DigilandCommerce.com provides an alternative to maintaining a physical presence in certain
areas where we operate, thus reducing our costs of operations. For example, after the launch of
DigilandCommerce.com in Malaysia, we found that it was more cost effective to close our
Penang sales office as most of our sales from that area were served through our B2B platform.
We encourage all our reseller customers to use DigilandCommerce.com. Through this B2B
platform, our reseller customers are able to independently place orders and obtain real-time
information on matters such as inventory levels as well as the customers' order status and
credit status 24 hours a day. Supported by MFG/PRO, our sales representatives and customer
support staff are able to provide customers with a quick response time for inquiries and
purchases. Delivery schedules may vary from jurisdiction to jurisdiction, but typically, all orders
received during office hours on a work day are delivered to customers either on that day or the
next working day.
Our strategy of providing a convenient and ef®cient delivery service to our reseller customers
allows them to maintain lower inventory levels. This in turn allows us to gauge the supply
conditions in the end-users' market and to control our inventory purchases more ef®ciently
whilst also giving us greater ¯exibility in our pricing policies. Given the importance of
DigilandCommerce.com as an integral part of our strategy, we intend, where viable, to
encourage our reseller customers to use DigilandCommerce.com and to upgrade and improve
the capabilities of DigilandCommerce.com and MFG/PRO in order to maintain and enhance our
competitive position.
67
.
Expand the Role of DigilandCommerce.com in the Future. DigilandCommerce.com provides an
online platform which has the potential to reach a wide customer base. Through this platform,
we are able to put in place localised web sites relatively quickly and without further signi®cant
additional expenditure. We believe that over time there may be opportunities to expand the role
of DigilandCommerce.com by utilising it as a general platform for B2B transactions and
communications. We do not currently use our web site in this manner, but we are exploring
ways in which such an approach could be implemented in line with our current focus on
product distribution. With our DigilandCommerce.com capabilities, we believe we are well
positioned to attract new suppliers looking at Internet-based distribution models.
.
Offer Consulting Services Directly Related to Our Experience with B2B. Through our
subsidiaries, Infonet and Aspiren, we intend to expand our business by providing our clients
with integrated and comprehensive information technology, communication and e-commerce
solutions that enhance our clients' business operations and communications, based on the
knowledge we have gained from our B2B operations. We believe that such a service is
attractive to existing and potential clients.
68
MANAGEMENT
BOARD OF DIRECTORS
Our Board of Directors is responsible for the management of our Company. Our Articles of
Association provide that our Board of Directors will consist of not less than two Directors.
The following table sets forth certain information regarding our Directors as of the Latest Practicable
Date.
Name
Age
Position
Principal Residence
Yeong Bou Wai, Daniel
42
Non-Executive Chairman
6 Chestnut Crescent
Singapore 679360
Lim Tow Cheng
45
Managing Director
Block 889 Tampines Street 81
#04-1048
Singapore 520889
Chua Kee Lock
40
Independent Director
124 Tanjong Rhu Road # 03-05
Casuarina Cove
Singapore 436916
Lee Boon How
43
Independent Director
17A Lakme Street
Singapore 456915
Business Experience
The business and work experience of each of our Directors is set out below:±
Yeong Bou Wai, Daniel, Non-Executive Chairman
Yeong Bou Wai, Daniel is the Non-Executive Chairman of the Board of Directors. Mr Yeong is
currently the Managing Director of GIL. He began his career in the GIL Group as its International
Sales Manager in 1986 and assumed his current position in 1996. As the Managing Director of GIL
and Executive Vice President of GES, he is responsible for the strategic planning, overall marketing
and ®nancial management and operations of the GIL Group. Mr Yeong holds a Diploma in
Mechanical Engineering, a Diploma in Sales and Marketing and an Advanced Diploma in Business
Administration.
Lim Tow Cheng, Managing Director
Lim Tow Cheng is our Managing Director. Mr Lim joined the GIL Group in 1994 as the Vice President
of Corporate Development and the Vice President of Sales and Marketing. He became the Managing
Director of Digiland in 1994. In his role as Managing Director, Mr Lim is responsible for the overall coordination of the business strategy of Digiland as established by the Board of Directors. He also
oversees and monitors the implementation of the action plans and policies agreed by the Board of
Directors to ensure that the relevant performance targets are achieved. In addition, Mr Lim is
responsible for the business planning process and the identi®cation of suitable business
opportunities as well as maintaining close business relationships with key suppliers and customers.
Mr Lim represents the GIL Group on various government committees such as the e-commerce
Specialist Manpower Programme Technical Committee, and chaired the Singapore Dealer Advisory
Council of Hewlett Packard in 1999.
Mr Lim has 12 years of experience in strategic planning and international business development. Prior
to joining the GIL Group, Mr Lim worked for the Singapore Trade Development Board, a government
organisation responsible for the formulation of Singapore's international trade policies and trade
development plans. He is closely associated with the growth of the Singapore electronics industry in
assisting in the development of Singapore as an International Procurement Centre for Electronics. Mr
Lim holds a Bachelor of Social Science degree (Honours in Economics) from the National University of
Singapore.
69
Lee Boon How, Independent Director
Lee Boon How is an independent director. Mr Lee is presently a director of Hajadi & Associates Pte
Ltd, a boutique corporate advisory company with assignments in mergers and acquisitions, equity and
debt raising, corporate and debt restructuring in the region and Australia. Mr Lee was formerly a Vice
President of OCBC Wearnes & Walden Management Pte Ltd, a regional venture capital company with
investments in high technology and traditional-business companies around the region and the greater
China area. From 1989 to 1993, Mr Lee was a Corporate Development Executive in the Strategic
Business Unit of SsangYong Cement (Singapore) Ltd, involved in making venture capital investments
in the USA and development of new businesses/seeking technology transfers in the high technology
area. In the later part of his tenure, he led the Singapore and Malaysia operations of a subsidiary
company in the computer networking and system integration business as an operations manager.
Mr Lee obtained his Masters of Business Administration from the University of Oklahoma and his
Bachelor of Science in Engineering (Naval Architecture and Marine Engineering) from the University
of Michigan.
Chua Kee Lock, Independent Director
Chua Kee Lock is an independent director. Mr Chua is presently the Deputy President of NatSteel Ltd.
Prior to re-joining NatSteel, Mr Chua was the Chief Executive Of®cer of Intraco Limited. Prior to joining
Intraco Limited, Mr Chua was the President of MediaRing.com Ltd, a leading provider of internet voice
communication services. Prior to joining the MediaRing Group, Mr Chua was an Executive VicePresident of NatSteel Ltd, where he was overseeing the Commercial Division. He was also a director
of NatSteel Electronics Ltd and NatSteel Broadway Ltd. Prior to joining NatSteel Ltd, Mr Chua was the
General Manager and Chief Operating Of®cer of Beaver Computer Corporation. From 1988 to 1991,
he was the Vice-President of Transpac Capital where he was responsible for direct investments into
companies in the US. From 1986 to 1987, he was at Stanford University where he obtained his
Masters of Science in Engineering. In 1985, he was an Engineer at Hewlett Packard.
Mr Chua graduated with a Bachelor of Science degree in Mechanical Engineering from the University
of Wisconsin at Madison, and a Masters of Science in Engineering from Stanford University.
MANAGEMENT
Our day-to-day operations are also entrusted to our other executive of®cers responsible for different
functions.
We set out below a chart depicting our management structure:±
Daniel Yeong
Non-Executive Chairman
Lim Tow Cheng
Chief Executive Officer
Regional
Operations
Country Managers*
*
Khoo Teng Liat
Wong Heng Hwie
Vice President
Group Finance Manager
Andrew Chan
Corporate Treasurer
Business Development
Simon Goh
Eugene Wang
Vice President
Chief Information Officer
Group Operations
Respective Country Managers who are in charge of each country's day-to-day operations report directly to Lim Tow Cheng.
We have at least one country manager in each of the countries we operate in.
70
The following table sets forth certain information regarding our other Executive Officers as of the
Latest Practicable Date:±
Name
Age
Position
Khoo Teng Liat
53
Vice-President, Business Development
Wang Cheng Hua, Eugene
33
Chief Information Of®cer
43
Vice President, Group Operations
Wong Heng Hwie
32
Group Finance Manager
40
Corporate Treasurer
Business Experience
The business and working experience of each of our Executive Officers is set out below:±
Khoo Teng Liat, Vice-President, Business Development
Khoo Teng Liat is our Vice President of Business Development and Regional Director for our South
East Asian operations. As Vice President of Business Development, Mr Khoo is responsible for the
business planning process, identi®cation of new and suitable business opportunities of our Digiland
Group. He also monitors, analyses and interprets trends and developments in the IT distribution
industry and from these, formulates appropriate strategies and actions to position Digiland to
capitalize on the opportunities identi®ed. As Regional Director for South East Asia, Mr Khoo is
responsible for the operations of Digiland's subsidiaries in Singapore, Indonesia, Malaysia,
Philippines, Thailand and Vietnam.
Mr Khoo has extensive experience in the IT business. He was the Regional Director of SIS from 1999
to 2001. He was also the Group General Manager-Systems Division of Electronic Resources from
1997 to 1999. Prior to that, he spent 18 years working with Hewlett-Packard in various capacities.
He was the Far East Dealer Manager, Asia Paci®c Channel Marketing Manager, Information Storage
Asia Paci®c Sales and Marketing Manager and Country General Manager for HP Indonesia. Mr Khoo
graduated from the University of Malaya with a Bachelor of Science (Honours) degree in Chemistry.
Wang Cheng Hua, Eugene, Chief Information Of®cer
Wang Cheng Hua, Eugene is our Chief Information Of®cer and General Manager of Aspiren. He joined
the GIL Group in 1995. During the last six years he has been responsible for information technology
strategic planning and implementation for the GIL Group. As a General Manager of Aspiren, he is
responsible for Aspiren's development as an e-commerce solutions provider for third parties. Prior to
joining the GIL Group, he was a Systems Analyst with SmithKline Beecham Pharmaceuticals, and a
Consultant with Andersen Consulting prior to that. He graduated from Shanghai Jiao Tong University
with Master of Science and Bachelor of Engineering degrees.
Goh Sing Hook, Simon, Vice President, Group Operations
Goh Sing Hook, Simon is our Vice President of Group Operations. Mr Goh is also currently the
Managing Director of Digiland Distribution (M) Sdn. Bhd. in Malaysia. Mr Goh joined the GIL Group in
1989. As General Manager, Group Operations, he is responsible for establishing operational policy,
procedures and controls for our Proforma Group. Before being posted to Malaysia as Managing
Director of Digiland Malaysia in July 1997, he was the Sales Director of GES.
Prior to joining the GES Group, Mr Goh was in charge of sales and project engineers at UMW
Industrial Power Pte Ltd and Sales Manager of Ecolab Pte Ltd. Mr Goh holds a diploma in Marine
Engineering from the Singapore Polytechnic, a diploma in Sales and Marketing from the Marketing
Institute of Singapore and the Institute of Marketing (UK) and an advanced diploma in Business
Administration from the Association of Business Executives in Singapore.
71
Wong Heng Hwie, Group Finance Manager
Wong Heng Hwie is our Group Finance Manager. He joined Digiland in 2000. He is responsible for the
management of our Group's ®nancial reporting, internal controls and accounting processes. In 1998,
he joined McGraw-Hill as a ®nancial analyst. Before joining GES Singapore as an accountant in 1996,
he was an Audit Senior in Deloitte & Touche. He graduated from Nanyang Technological University
with a Bachelor of Accountancy (Merit) in 1993. Mr Wong is a Certi®ed Public Accountant and a
member of the Institute of Certi®ed Public Accoutants of Singapore.
Chan Weng Chong, Andrew, Corporate Treasurer
Chan Weng Chong, Andrew is our Corporate Treasurer. He joined the GIL Group in 2001. In GIL, he
was primarily responsible for cash management, hedging of foreign exchange exposure, liaising with
bankers and other treasury related activities.
Before joining the GIL Group, he was with Singapore Technologies Engineering Ltd (``ST Engg'') and
was responsible for putting in place the treasury functions and activities that oversees the
requirements for the entire ST Engg group of companies. He joined Singapore Technologies Private
Limited as a Senior Treasury Executive in 1997. Prior to that, he was a senior dealer at Deutsche
Bank, attached to their treasury department for 12 years. He holds an Advanced Diploma in
Business Administration (1999) and is currently pursuing a Bachelor of Arts (Honours) degree in
Business and Marketing with the University of Portsmouth (UK).
EMPLOYMENT AGREEMENTS
As part of the Demerger and the proposed listing of our Company on the SGX-ST, all of our
employees have entered into separate employment agreements with our Company.
FAMILY RELATIONSHIP
None of our Directors or executive of®cers are related to one another.
AGREEMENT, ARRANGEMENT OR UNDERSTANDING
None of our Directors or executive of®cers have any agreement, arrangement or understanding with
any of our substantial shareholders, customers or suppliers pursuant to which such person was
appointed as our Director or executive of®cer, as the case may be.
DECLARATIONS
Save as disclosed below, no Director or Executive Officer or controlling shareholder is or involved in
any of the following events:±
(i)
a petition in the last ten years under any bankruptcy laws filed in any jurisdiction against him or
any partnership in which he was a partner or any corporation of which he was a director or an
executive officer;
(ii)
unsatisfied judgements outstanding against him;
(iii)
a conviction of any offence, in Singapore or elsewhere, involving fraud or dishonesty punishable
with imprisonment for three months or more, or charged for violation of any securities laws or
any such pending criminal proceeding against him;
(iv)
a conviction of any offence, in Singapore or elsewhere, involving a breach of any securities or
financial market laws, rules or regulations;
(v)
the subject of judgement in any civil proceeding in Singapore or elsewhere in the last ten years
involving fraud, misrepresentation or dishonesty or any such pending civil proceeding against
him;
(vi)
a conviction in Singapore or elsewhere of any offence in connection with the formation or
management of any corporation;
72
(vii) disqualification from acting as a director of any company, or from taking part in any way directly
or indirectly in the management of any company;
(viii) the subject of any order, judgement or ruling of any court of competent jurisdiction, tribunal or
governmental body permanently or temporarily enjoining him from engaging in any type of
business practice or activity; and
(ix)
the management or conduct of affairs of any company or partnership which has been
investigated by an inspector appointed under the provisions of the Companies Act, or other
securities enactment or by any other regulatory body in connection with any matter involving
the company or partnership occurring or arising during the period when he was so concerned
with the company or partnership.
CHUA KEE LOCK Ð BEAVER COMPUTER CORPORATION
Mr Chua was a director of Beaver Computer Corporation (``BCC''), a subsidiary of NatSteel Ltd, until
end-May 1993. On 25 April 1995, a major creditor of BCC, namely BACI Service Corp. (``BACI''),
exercised its rights under the California Uniform Commercial Code as a secured creditor of BCC by
Conducting a duly noti®ed public sale of BCC's assets. At that time, BACI maintained a security
interest in BCC. The assets so acquired by BACI included, inter alia, the general intangibles of BCC,
ie patents, patent applications and all trade names and trade marks. To the best of Mr Chua's
knowledge, BCC has ceased all operations since the foreclosure sale of its assets.
TERM OF OFFICE
Our Directors will hold of®ce until our next annual general meeting, where they will be eligible for reelection by our shareholders. At each annual general meeting thereafter, one-third of our Directors
(other than our Managing Director) will retire from of®ce by rotation, although they will be eligible for
re-election by our shareholders.
Our executive of®cers (including our Managing Director) shall hold of®ce in accordance with the terms
of their employment with us.
SERVICE CONTRACT
None of our Directors, except for Mr Lim Tow Cheng, have any service contracts with our Company or
any of our subsidiaries providing for bene®ts upon termination of employment.
Pursuant to the terms of his service contract, which covers a period of three years, Mr Lim is entitled
to a monthly salary of S$16,000. Mr Lim shall also be entitled to an aggregate performance bonus
equal to 0.7 per cent. of the Consolidated Pro®t Before Tax (as de®ned below) where the
Consolidated Pro®t Before Tax is more than S$5.0 million (Singapore Dollars Five million).
``Consolidated Pro®t Before Tax'' means, with respect to a ®nancial year of our Company, the
audited consolidated pro®t before tax of our Proforma Group for that ®nancial year after (i) deducting
pro®t before tax attributable to minority interests and (ii) excluding any extraordinary items.
Our Company shall, if the Compensation Committee (as described below) recommends, pay Mr Lim a
discretionary bonus of up to three months' of his salary for that ®nancial year. The Compensation
Committee of the Board shall determine the amount of the discretionary bonus by taking into
consideration the performance of our Proforma Group and of Mr Lim for that ®nancial year and any
other circumstance which the Compensation Committee considers relevant.
Our Company shall also provide Mr Lim with the use of a car and shall defray the cost of his owning
and maintaining a membership with a golf and country club.
73
CORPORATE GOVERNANCE
We recognise the importance of corporate governance and the offering of high standards of
accountability to our shareholders. Our Audit Committee will assist our Board of Directors with
regards to discharging their responsibility to safeguard our assets, maintain adequate accounting
records, and develop and maintain effective systems of internal control, with an overall objective to
ensure that our management has created and maintained an effective control environment in our
Group, and that our management demonstrates and stimulates the necessary aspect of our Group's
internal control structure among all parties.
Our Audit Committee would provide a channel of communication between our Board of Directors, our
management and our external auditors on matters relating to audit.
In particular, our Audit Committee will:±
(a)
review with the external auditors the audit plan, their evaluation of the system of internal
accounting controls, their audit report, their management letter and the management's response;
(b)
review the half-year and annual financial statements and balance sheet and profit and loss
accounts before submission to our Board of Directors for approval, focusing in particular, on
changes in accounting policies and practices, major risk areas, significant adjustments resulting
from the audit, compliance with accounting standards as well as compliance with the SGX
Listing Manual and any statutory or regulatory requirements;
(c)
review the internal control and procedures and ensure co-ordination between the external
auditors and our management, reviewing the assistance given by our management to the
auditors, and discuss problems and concerns, if any, arising from the interim and final audits,
and any matters which the auditors may wish to discuss (in the absence of our management
where necessary);
(d)
review and discuss with the external auditors any suspected fraud or irregularity, or suspected
infringement of any relevant laws, rules or regulations, which has or is likely to have a material
impact on our Proforma Group's operating results or financial position, and our management's
response;
(e)
consider the appointment or re-appointment of the external auditors and matters relating to the
resignation or dismissal of the auditors;
(f)
review interested party transactions falling within the scope of Chapter 9A of the SGX Listing
Manual and to review the compliance of interested party transactions with the procedures as
disclosed on pages 92 and 93 of this Prospectus;
(g)
undertake such other reviews and projects as may be requested by our Board of Directors and
will report to our Board of Directors its findings from time to time on matters arising and requiring
the attention of our audit committee; and
(h)
generally undertake such other functions and duties as may be required by statute or the SGX
Listing Manual and by such amendments made thereto from time to time.
AUDIT COMMITTEE
Our Audit Committee comprises Mr Yeong Bou Wai, Daniel, our non-executive Vice-Chairman and our
two independent Directors, Mr Chua Kee Lock and Mr Lee Boon How. The chairman of our Audit
Committee is Mr Lee Boon How. In accordance with SGX-ST Best Practices and the SGX-ST Code
of Corporate Governance, the Audit Committee reviews our ®nancial statements and the underlying
accounting policies of our Company before they are submitted to our Board of Directors with the
external auditors' report on the ®nancial statements. It also reviews, for both internal and external
auditors where applicable, the annual audit plan, reports and management letters and responses
thereto. Our Audit Committee also makes recommendations to our Board of Directors concerning
the engagement of external auditors. Signi®cant transactions with related parties are also reviewed
by our Audit Committee. See ``Transactions with Af®liates'' on pages 87 to 93 of this Document.
74
COMPENSATION COMMITTEE
Our Compensation Committee comprises Mr Yeong Bou Wai, Daniel, Mr Chua Kee Lock and Mr Lee
Boon How. The Chairman of our Compensation Committee is Mr Yeong Bou Wai, Daniel. Our
Compensation Committee is responsible for all matters relating to compensation, including
approving annual compensation determinations and administering the Digiland Share Option Plan.
NOMINATING COMMITTEE
Our Nominating Committee comprises Mr Lee Boon How, Mr Chua Kee Lock and Mr Yeong Bou Wai,
Daniel. The Chairman of our Nominating Committee is Mr Chua Kee Lock. In accordance with the
SGX-ST Code of Corporate Governance, our Nominating Committee ensures that (a) there is a
formal and transparent process for the appointment of new Directors and (b) there is a formal
assessment of the effectiveness of our Board of Directors and the contribution by each Director
thereto. The responsibilities of our Nominating Committee include the following:±
(a)
making recommendations on all appointments to our Board of Directors;
(b)
considering re-nominations to our Board of Directors having regard to each Director's
contribution and performance;
(c)
determining annually whether or not a Director is independent; and
(d)
deciding how the performance of our Board of Directors may be evaluated objectively.
COMPENSATION
The aggregate amounts of compensation paid, and bene®ts in kind granted, to our Directors for
services rendered in all capacities to our Proforma Group FY2000 and in FY2001 were S$241,000
and S$309,000 respectively. A portion of the compensation to our Directors and executive of®cers
consists of bonuses and payment under our pro®t sharing plan. The amount of bonus and pro®t
sharing payment in each ®nancial year depends on the level of our consolidated pro®t before tax
and extraordinary and non-recurring items for that year.
Pro®t Sharing
Under his service contract, Mr Lim Tow Cheng shall be entitled to an annual bonus equivalent to 0.7
per cent. of the consolidated net pro®t after tax of the Digiland Group for each ®nancial year he is
employed by us. See ``Service Contract'' on page 73 of this Document.
We set forth below the bands of the aggregate amounts of compensation and bene®ts in kind for our
Directors and executive of®cers for the ®nancial years ended 30 June 2000 and 2001.
Directors' Compensation Bands
------- Year ended 30 June 2000 -----Executive
Directors
NonExecutive
Directors
S$500,000 and above
Ð
S$250,000 to S$499,999
S$0 to S$249,999
------- Year ended 30 June 2001 ------
Total
Executive
Directors
NonExecutive
Directors
Total
Ð
Ð
Ð
Ð
Ð
1
Ð
1
1
Ð
1
Ð
Ð
Ð
Ð
Ð
Ð
75
SUMMARY OF THE DIGILAND SHARE OPTION PLAN
OVERVIEW
In connection with its listing on the SGX-ST, Digiland proposes to adopt the Digiland Share Option
Plan (the ``Plan'') at the Digiland EGM. One of the objectives of the Demerger is to enable Digiland
to incentivise its management separately from the incentives offered to GIL's management and the
Plan would enhance Digiland's ability to do so.
As GIL shareholders will become Digiland shareholders immediately after the Demerger, GIL will at the
GIL EGM ask the independent GIL shareholders to authorise it to vote in favour of the Plan at the
Digiland EGM in order to give the independent GIL shareholders the opportunity to consider and
approve the Plan. Given that GIL will hold approximately 99.7 per cent. of the issued share capital of
Digiland immediately prior to the Demerger, GIL's vote on the Plan will be decisive. If the independent
GIL shareholders at the GIL EGM authorise GIL to vote in favour of the Plan at the Digiland EGM, the
Plan would be adopted at the Digiland EGM.
Should the independent GIL shareholders not authorise GIL to vote in favour of the Plan, Digiland will
not have a share options plan in place upon the Demerger. In such case, we intend to seek our
shareholders' approval of the Plan at a separate EGM after the completion of the Demerger.
Yeong Bou Wai, Daniel, our non-Executive Chairman, and Lim Tow Cheng, our Managing Director,
Wang Cheng Hua, Eugene and Goh Sing Hook, Simon have shares in both GIL and Digiland and will
abstain from voting at both the GIL EGM and the Digiland EGM on resolutions relating to the
Demerger and the Plan. All eligible participants of the Plan will be noti®ed that they should not vote
on the resolution relating to the Plan.
Under the Plan, we may grant to eligible persons options to subscribe for new shares at a ®xed
exercise price (`Òptions''). We describe these Options further below. As of the date of this
Document, we have not granted any Options under the Plan. The rules of the Plan are found at
Annex G of this Document.
The Plan is a share incentive scheme. The main objectives of the Plan are:±
.
to recognise those who have contributed to the success and development of our Proforma
Group;
.
to motivate employees to optimise their performance standards, dedication and productivity; and
.
to attract outstanding new employees, and retain key employees, with abilities and expertise
crucial to our long-term growth and pro®tability.
The Plan is administered by our Compensation Committee. The Plan complies with Practice Note 9h
of the SGX-ST Listing Manual.
ELIGIBILITY
Persons eligible for Options are:±
.
Proforma Group employees including executive directors who, as of the date of grant, (i) are 21
years old or more, (ii) hold such rank as the Compensation Committee may designate from time
to time and (iii) have been in the full-time employment of the Proforma Group for such period as
the Compensation Committee may designate from time to time;
.
Proforma Group non-executive directors who, in the opinion of the Compensation Committee,
have contributed or will contribute to the success and development of the Proforma Group;
.
associated company employees including executive directors (i) who, as of the date of grant, (a)
are 21 years old or more, (b) hold such rank as the Compensation Committee may designate
from time to time and (c) have been in the full-time employment of the relevant associated
company for such period as the Compensation Committee may designate from time to time
and (ii) who, in the opinion of the Compensation Committee, have contributed or will contribute
to the success and development of the Proforma Group; and
76
.
associated company non-executive directors who, in the opinion of the Compensation
Committee, have contributed or will contribute to the success and development of the
Proforma Group.
Controlling shareholders of Digiland or an associate of such controlling shareholders (as those terms
are de®ned in the SGX-ST Listing Manual) shall not be eligible to participate in this Plan.
While the Plan will cater primarily to Proforma Group employees including executive directors, it is
recognised that non-executive directors are persons who can make signi®cant contributions and
provide valuable support to our Proforma Group through their close working relationships with the
Proforma Group, even though they are not employed within our Proforma Group. Non-executive
directors are generally persons from different professions and working backgrounds. Our Company
regards this category of persons as a resource pool from which the Proforma Group is able to tap
for business contacts and networking, and for the bene®t of their experience and insights. They are
able to provide our Company with the bene®t of their extensive experience, knowledge and expertise
that can assist in furthering the business interests of the Proforma Group, and/or provide our
Company with strategic or signi®cant alliances and opportunities.
The Plan will provide our Company with a means to acknowledge special assistance or extra efforts of
a non-executive director (for instance, in introducing or facilitating business opportunities for the
Proforma Group, or where additional time has been expended in signi®cant corporate exercises or
projects that are undertaken by the Proforma Group), in addition to, or in lieu of increasing, the cash
quantum of directors' fees.
Further, in view of the expected increase in the role of non-executive directors following the
implementation of the Code of Corporate Governance, we feel that it is important to be able to grant
Options to non-executive directors in order to attract good quality non-executive directors to serve on
our Board of Directors.
Alternatively, in times of dif®cult economic conditions where wage restraint is practised, the ability to
grant Options to non-executive directors allows our Company the ¯exibility to give recognition for the
services and contributions made, while maintaining the same level of directors' fees, or to redress a
reduction in the cash quantum of directors' fees.
Nevertheless, in order to minimise any possible con¯icts of interest, and so as not to compromise the
objectivity of independent members of our Board of Directors who may, in the future, be selected to
participate in the Plan, we expect that non-executive directors would, in the main, continue to be
remunerated for their services by way of directors' fees. As such, while the Plan does not specify
any particular individual or collective limit as to the amount of Shares to be comprised in Options
that may be granted to Proforma Group employees including executive directors or non-executive
directors, it is envisaged that Options that may be granted to non-executive directors will not
comprise (whether on an individual or collective basis) a signi®cant portion of the Shares available
under the Plan. Rather, it is intended that the bulk of Options that are granted pursuant to the Plan
will be to Proforma Group employees including executive directors, as they will comprise the bulk of
the participants of the Plan.
Associated company employees including executive directors and non-executive directors work
closely with the Proforma Group. They provide assistance and support to our Proforma Group on a
continuing basis in our development and implementation of business strategies, investments and
projects in which our Company and/or the Proforma Group has interests. We recognise that
continued support of these persons is important to the progress, well-being and stability of the
Proforma Group. The grant of Options will provide a means to acknowledge the special contributions
or efforts made by them.
Our Company will consider, inter alia, the contributions of Proforma Group non-executive directors,
associated company employees including executive directors and associated company nonexecutive directors to the success and development of our Proforma Group when selecting them for
participation in the Plan. The selection of eligible persons for participation in the Plan, the number of
Shares to be comprised in Options that may be granted, and the manner and bases by which the
contributions of participants will be measured, are described below under the sub-heading
`Èntitlements''.
77
Controlling shareholders of our Company or associates of such controlling shareholders (as those
terms are de®ned in the SGX-ST Listing Manual) may not participate in the Plan, notwithstanding
that they may otherwise qualify under any of the above categories of participants as the rules of the
Plan do not provide for their participation. In the eventuality that controlling shareholders and/or their
associates are to be included as categories of potential participants in the Plan, speci®c approval for
the participation of each controlling shareholder or associate would be sought at that future point in
time from independent shareholders and the rules of the Plan would be modi®ed accordingly.
Certain persons eligible for Options are also directors or employees of our former parent company,
GIL, and its subsidiaries (other than our Proforma Group). We may grant Options to such persons in
their capacity as directors or employees of our Proforma Group. We do not intend to grant Options to
a person purely in his capacity as a director or an employee of GIL and its subsidiaries (other than our
Proforma Group). We will consider, inter alia, the contributions of such persons to the success and
development of our Proforma Group when selecting them for participation in this Plan.
ENTITLEMENTS
The selection of, and the actual number of Shares to be offered under Options to participants of this
Plan will be determined by the Compensation Committee at its absolute discretion, which will take into
account criteria such as, in the case of a Proforma Group employee including executive directors, his
rank, performance, years of service and potential for future development, and, in the case of an
associated company employee including executive directors or non-executive director, his
contribution to the success and development of our Proforma Group. The manner and bases by
which the contributions of participants are to be measured may include a performance framework
that incorporates ®nancial and/or non-®nancial performance measurement criteria.
In line with the objectives of this Plan and in order to provide the Compensation Committee with the
¯exibility to reward and incentivise participants according to their performance rather than their
corporate rank, this Plan does not contain speci®c limits on the number of Shares that may be
comprised in Options to be granted over a ®nancial year, or to a participant for the duration of the
Plan, or to a particular category of participants.
PLAN SIZE
We may grant Options for up to such number of new Shares which, when aggregated with the number
of Shares issued or to be issued under all of our share-based incentive plans for the time being in
force, shall not exceed 15 per cent. of our issued share capital immediately prior to the grant.
Options are granted for a nominal consideration of S$1.00 per grant.
The 15 per cent. Plan size will provide for suf®cient Shares to support the use of Options in the
Company's overall long-term incentive and compensation strategy. The Company believes that a
Plan with the maximum permissible Plan size will provide the Company with the means and the
¯exibility to apply share options as incentive tools in a meaningful and effective manner, and to
reinforce the use of a share option Plan as a means to encourage staff retention and to align
participants' interests more closely with those of shareholders. A maximum Plan size does not
however imply that it would be used fully. Indeed, in granting options, the discretion would be
exercised judiciously in each year, and cumulatively in aggregate, so as to ensure that the Plan size
remains available for grants during the entire operation of the Plan.
CHARACTERISTICS OF THE OPTIONS
Under the Plan, we may grant Options with an exercise price ®xed at, or at a discount of up to 20 per
cent. to, the ``market price'' for Shares . The ``market price'' of a Share is the price determined by the
Compensation Committee to be equal to the average of the last dealt prices for a Share on the
SGX-ST over the ®ve consecutive Market Days immediately preceding the grant of that Option.
78
Options vest in (i.e., become exercisable by) the holders thereof in accordance with a vesting
schedule. Holders of Options may exercise up to a certain amount of their Options on each vesting
date under the schedule. Generally, Options granted under the Plan may be exercised after the
second anniversary date of grant of the Options, or such later date as the Compensation Committee
shall specify based on a vesting schedule for the options to be determined on the date of grant of the
relevant Options, but before the expiration of the validity period applicable to that Option. Vesting is
subject to certain conditions, such as the holders' employment not having been terminated for cause
on the relevant vesting date. The vesting schedule for Options will be determined on the date of grant
of our Compensation Committee in its discretion, in compliance with the applicable requirements of
the SGX-ST.
Holders of Options, being employees including executive directors of our Company or our
subsidiaries, have up to ten years from the date of grant to exercise their vested Options. Options
that are granted to non-executive directors of our Proforma Group or employees or directors of
associated companies will have a validity period of ®ve years from the date of grant.
The longer life span for Options granted to employees including executive directors of our Company
or our subsidiaries under this Plan will help to encourage such persons to take a long term view of our
Company and Proforma Group.
We may grant Options at any time during the term of the Plan, which is ten years from the date it was
adopted by our shareholders (but not for certain periods before and after announcements of our
®nancial results or other material information).
GRANT OF OPTIONS AT A DISCOUNT
With the Plan, we aim to offer a competitive compensation and incentive package. The flexibility to
grant Options at a discount to market price is important to enable us to achieve the objectives of the
Plan. For instance:±
.
due to stock market fluctuations, the market price of the Shares on the date of grant of Options
may not truly or fairly reflect the financial performance or valuation of our Company. In such
circumstances, Options granted without a discount may be a less powerful form of incentive
than Options granted at a discount. The flexibility to grant Options at a discount under the Plan
therefore helps us to continue to use Options as an incentive in such circumstances;
.
in the event that discounted Options become, as appears to be increasingly the case, a general
market norm, the flexibility to grant Options at a discount under the Plan helps us to continue to
offer a competitive compensation and incentive package; and
.
we may wish to target certain of our business units to improve their performance. In such
circumstances, we may consider granting Options to employees of those units at a discount or
at a greater discount than other grantees in order to further motivate those employees to
improve their performance. The ¯exibility to grant Options at a discount under the Plan
therefore helps us to differentiate among and structure grants of Options in line with our
business and corporate objectives.
Our Compensation Committee will determine on a case-by-case basis whether to grant Options at a
discount, and, if so, the amount of the discount (such discount will not exceed 20 per cent. of the
market price of the Shares on the date of grant of the Options). Our Compensation Committee will
consider such matters as it may consider relevant, such as our business and corporate objectives,
our results of operations and ®nancial condition, the individual performance of each grantee, his
contribution to the success and development of our Proforma Group and his potential for further
development and prevailing market conditions. The exercise price of the Options shall not, however,
be less than the nominal value of the Shares.
79
We recognise that there is a cost to us in granting Options with a discount as compared to Options
without a discount. We would not receive the amount by which the market price at the date of grant
exceeds the Option exercise price and we would not have the use of the funds equal to that amount
(or any interest thereon). Accordingly, the net tangible asset value of our Company would be lower by
that amount (and any interest thereon) than what it would have been if we had granted Options
without a discount. However, we believe that, increasingly, a key element in the compensation and
incentive packages is the amount of Options granted and the discount on those Options so as to
attract, retain and incentivise our participants to higher standards of performance as well as to
encourage greater dedication and loyalty by enabling us to give recognition for past contributions
and services as well as motivating participants generally to contribute towards our Proforma Group's
long-term prosperity. To remain competitive, we believe that we need the ¯exibility to grant Options
comparable with industry practice.
It should be further noted that while a maximum discount of 20 per cent. is proposed, it does not
imply that all Options granted will have or include a discount. The giving of a discount (and the
quantum of the discount that may be given) will depend on certain factors and the circumstances of
each case, as explained above.
COST OF GRANT OF OPTIONS
We recognise that there will be a cost to us in granting Options (whether or not at a discount) under
the Plan to the extent that the fair value of the Options exceeds the consideration we receive for the
grant of the Options. The fair value of an Option is what a willing buyer would pay a willing seller for
the Option at the time of the grant. In general, the longer the exercise period of the Option and the
greater the discount of its exercise price to the prevailing market price of the Shares, the greater the
fair value of the Option would be. We will receive a nominal sum of S$1.00 in cash in consideration for
the grant of each Option under the Plan. Accordingly, there will be a cost to us in granting Options
(whether or not at a discount) under the Plan insofar as the nominal consideration we receive for the
grant of the Options is less than the fair value of the Options at the time of the grant.
Currently, Singapore GAAP does not require us to recognise any cost in cash in granting the Options
(as opposed to granting cash bonuses). Accordingly, the grant of Options under the Plan would not
affect our pro®tability as shown in our audited consolidated ®nancial statements as no cash outlay
would be expended by the Company or the Proforma Group at the time of the grant of such options,
as compared with cash bonuses. However, in a recent exposure draft (ED/SAS 45 published in
September 2001), certain standards have been proposed for the accounting and reporting of sharebased compensation both to employees (such as by way of share option schemes) as well as nonemployees (such as by the issuance of shares in exchange for goods and services) using a fair value
based method. Its objective is to enhance readers' understanding of the signi®cance of such sharebased compensation to the ®nancial position, performance and cash ¯ows of a company.
Should this proposal be implemented as a new accounting standard in Singapore in the future, the
®nancial statements of listed companies with share option schemes or other forms of share-based
incentive plans for employees will include disclosures of share-based compensation to employees
measured based on their fair value on the date of grant. The fair value of an Option at the time of
grant may be derived by applying any of a variety of valuation techniques or pricing models
developed for valuing traded options (e.g., the Black-Scholes or binominal models) to determine the
estimated value of the Option on the grant date. If compensation costs were to be recognised, the
estimated value of the Option on the grant date would have to be charged to the Company's pro®t
and loss account over the service period, which is usually the vesting period.
80
When Options are exercised, the cash in-¯ow will add to the consolidated NTA of the Company and
its share capital base will grow. Where Options are granted with subscription prices that are set at a
discount to the market prices for the Shares prevailing at the time of the grant of such options, the
amount of the cash in¯ow to the NTA of the Company on the exercise of such Options would be
diminished by the quantum of the discount given, as compared with the cash in¯ow that would have
been receivable by the Company had the Options been granted at the market price of the Shares
prevailing at the time of the grant. The amount of diminution would depend ultimately on the number
of Shares comprised in Options that are exercisable at subscription prices with a discount element,
and the quantum of the discount.
In respect of Options with subscription prices that may be adjusted with a discount to the market
price, as the vesting of such Options are subject to, and contingent upon, the participant meeting
his performance targets (failing which, and depending on the participant's shortfall from the set
targets, either the subscription price will not be adjusted and will remain at the market price of the
Share at the time of grant of the Option, or, the Option will be cancelled), the consolidated NTA of
the Proforma Group should increase before such Options become exercisable.
81
PRINCIPAL SHAREHOLDERS AND SHARE CAPITAL
AUTHORISED AND ISSUED SHARE CAPITAL
Our authorised and issued share capital as at the 10 January 2002 is as follows:±
Authorised
Ordinary shares
Number of Shares
1,500,000,000
Aggregate nominal value (S$)
225,000,000
Issued and fully paid:
Ordinary shares
Number of Shares
716,501,597
Aggregate nominal value (S$)
107,475,239.50
DIGILAND SHAREHOLDERS
Our shareholders as of 10 January 2002 and immediately after the Demerger are as follows:±
As of 10 January 2002
Number of
Digiland Shares
%(1)
Immediately after the
Demerger
Number of
Digiland Shares
%(1)
Digiland Directors
Yeong Bou Wai, Daniel(2)
1,000,000
0.1
4,111,549
0.6
Lim Tow Cheng
1,000,000
0.1
1,060,000
0.1
Chua Kee Lock
Ð
Ð
Ð
Ð
Lee Boon How
Ð
Ð
127,000
n.m.
Ð
Ð
24,000
n.m.
(2)
Digiland Principal Executive Of®cers
Khoo Teng Liat
Wong Heng Hwie
Ð
Ð
6,000
n.m.
Ð
Ð
Ð
Ð
(2)
Wang Cheng Hua, Eugene(2)
66,667
n.m.
856,769
0.1
133,333
n.m.
142,333
n.m.
Ng Won Lein, Sheila(2)
300,000
n.m.
300,000
n.m.
714,001,597
99.7
Ð
Ð
Goh Lik Tuan
Ð
Ð
64,817,136
9.0
Liew Kim Choo(4)
Ð
Ð
66,516,372
9.3
(5)
Ð
Ð
1,146,720
0.2
Andatino Investments Ltd(6)
Ð
Ð
24,000,000
3.3
Almon Bury Agents Ltd(7),(8)
Ð
Ð
90,461,240
12.6
Ong Seow Yong(9)
Ð
Ð
1,200,000
0.2
Richard John Colless
Ð
Ð
1,800,000
0.3
Terence Edward O'Connor(9)
Ð
Ð
480,000
0.1
(3)
Alxia Pte Ltd
(9)
NTUC Income Co-operative Insurance Limited(10)
Ð
Ð
40,851,000
5.7
Public shareholders
Ð
Ð
418,601,478
58.4
716,501,597
100
716,501,597
100
Total
Notes:±
(1) Based on the issued share capital of 716,501,597 Digiland shares and assuming that there had been no transfer of any GIL
shares from 10 January 2002 to the Demerger.
82
(2) DY, Lim Tow Cheng, Goh Sing Hook, Simon, Wang Cheng Hua, Eugene and Ng Won Lein, Sheila held Digiland shares in
the form of Restricted shares (as de®ned below).
(3) Mr Goh Lik Tuan (``GLT'') is the executive chairman and founder of GIL. He has more than 20 years experience in the
electronics and computers industry. He oversees the strategic planning, overall marketing and ®nancial management of
the GIL Group and is responsible for the strategic direction, growth and expansion of the GIL Group. Upon the Demerger,
he will be a substantial shareholder of our Company. He will not be a director or hold any executive position in our
Proforma Group.
(4) Mdm Liew Kim Choo (``LKC'') is the wife of GLT. She is a non-executive director of certain subsidiaries of the GIL Group.
Upon the Demerger, she will be a substantial shareholder of our Company. She will not be a director or hold any executive
position in our Proforma Group. Each of GLT and LKC are deemed to have an interest in all the Digiland shares held by the
other for the purposes of the Companies Act.
(5) Each of GLT and LKC holds 50 per cent. of the issued share capital of Alxia Pte Ltd (`Àlxia'') and is therefore deemed to
have an interest in all the Digiland shares held by Alxia for the purposes of the Companies Act.
(6) Each of GLT and LKC holds 50 per cent. of the issued share capital of Andantino Investments Ltd (`Àndatino'') and is
therefore deemed to have an interest in all the Digiland shares held by Andatino for the purposes of the Companies Act.
(7) Each of GLT and LKC holds more than 20 per cent. of the issued share capital of Almon Bury Agents Limited (`Àlmon
Bury'') and is therefore deemed to have an interest in all the Digiland shares held by Almon Bury for the purposes of the
Companies Act. The other shareholder of Almon Bury is Yeong Bou Wai, Daniel (``DY''), the managing director of GIL. DY
holds less than 10 per cent. of the issued share capital of Almon Bury and is therefore not deemed to have an interest in any
of the Digiland shares held by Almon Bury for the purposes of the Companies Act (but see further Note (7) below).
(8) Almon Bury had issued bonds due 2003 (the ``Bonds'') to Credit Suisse First Boston (Singapore) Limited (``CSFB''). The
Bonds are exchangeable, at the option of CSFB, into Almon Bury's GIL shares at any time during the term thereof. The
number of GIL shares to be exchanged for the Bonds depends on the exchange price of the Bonds as determined in
accordance with the terms and conditions of the Bonds. If and when CSFB exercises its option to exchange the Bonds
into Almon Bury's GIL shares, the number of GIL shares held by Almon Bury, and hence the number of Digiland shares
which Almon Bury would receive upon the Demerger, would be reduced accordingly.
To secure Almon Bury's obligations to deliver GIL shares to CSFB upon the exercise of the Bonds, each of GLT, LKC and
DY had contributed their GIL shares to Almon Bury in proportion to their respective shareholdings in Almon Bury. The GIL
shares are held in an escrow account and charged as security in favour of CSFB. While held by Almon Bury, each of GLT,
LKC and DY retains the bene®cial ownership of the GIL shares which he or she had contributed to Almon Bury.
(9) Mr Ong Seow Yong, Mr Richard John Colless and Mr Terence Edward O'Connor are independent directors of GIL.
(10) NTUC Income Co-operative Insurance Limited is a substantial shareholder of GIL.
The Shares held by GIL will be distributed to GIL Shareholders pursuant to the Demerger. Following
the Demerger, the shareholdings of 99.7 per cent. of Digiland Shares will mirror the shareholdings of
GIL.
RESTRICTED SHARES
On 28 March 2000, we invited certain of our Directors and management executives to subscribe for
new ordinary shares of par value S$1.00 each in our Company (``Restricted Shares''). We made the
offer in recognition of their contribution to the success and development of our Group. We do not
propose to make any further similar offers.
We issued a total of 470,000 Restricted Shares at a subscription price of S$1.07 per share. The
subscription price was based on our audited net tangible asset value as of 31 December 1999.
Each holder of Restricted Shares is the full beneficial owner of his Restricted Shares and is entitled to
all the rights attached to them (including voting rights and rights to dividends and other distributions)
upon the completion of his subscription for those Restricted Shares. However, holders of Restricted
Shares agree, as part of the terms of their subscriptions, that:±
.
delivery of share certificates: we will hold the share certificates for the Restricted Shares upon
completion; we will deliver to the relevant holder the share certificates for (i) 20 per cent. of the
total number of his Restricted Shares on the first anniversary of completion, (ii) 30 per cent. on
the second anniversary and (iii) the balance on the third anniversary;
.
conditions to delivery: to receive the share certificates on each of the delivery dates, the
relevant holder (i) must not have ceased to be employed by us or GIL (as the case may be) on
such delivery date, either by resignation or for cause, and (ii) must have been entitled to receive
share certificates on the preceding delivery date;
.
restrictions: so long as the relevant holder has not received the share certificates for any of his
Restricted Shares, he may not sell, transfer or otherwise dispose of those shares; and
.
call option: if any conditions to delivery of the share certificates are not fulfilled, the relevant
holder must, upon demand, sell all of his Restricted Shares the share certificates of which have
not been delivered to him as we may direct.
83
When some holders of Restricted Shares left their employment, they re-transferred their Restricted
Shares to GIL at cost. A total of 95,000 Restricted Shares were so re-transferred.
CHANGES IN SHARE CAPITAL
We set forth below details of the changes in the issued share capital of our Company for the last three
years preceding this Document:±
Date of
alteration
Number of ordinary
shares allotted/
(cancelled/redeemed)
Nature of alteration
Issued and paid up
share capital after
change
Singapore:±
Digiland
5,000,000 shares of S$1
each
Issue of shares at par to GIL via the
capitalisation of an amount of
S$3,500,000 due to GIL and via the
capitalisation of an amount of 1,500,000
of accumulated pro®ts
S$6,000,000
470,000 shares of
S$1 each
Issue of Restricted Shares at S$1.07
each for cash to certain directors and
management executives
S$6,470,000
16 June 2001
31,530,000 shares
of S$1 each
S$31,530,000 due to GIL
S$38,000,000
10 January 2002
27,000,000 shares of par
value S$1 each
Issue of shares at S$1.185 each for
cash to GIL
S$65,000,000
10 January 2002
Ð
Sub-division of every ordinary share of
par value S$1 each into 20 ordinary
shares of par value S$0.05 each
10 January 2002
849,504,791 shares of par
value S$0.05 each
S$42,475,239.55 due to GIL
10 January 2002
Ð
Consolidation of three ordinary shares
of par value S$0.05 each into one
ordinary share of par value S$0.15 each
2 shares of S$1 each
Issue of shares for incorporation
S$2
2 shares of S$1 each
Issue of shares for incorporation
S$2
During the year ended
30 June 2000
Ð
S$107,475,239.55
Ð
DigilandMall.com Pte Ltd
30 June 2000
Aspiren Pte Ltd
30 June 2000
Malaysia:±
Digiland Distribution (M) Sdn. Bhd.
30 June 1998
1,000,000 shares of RM1
each
Issue of shares at par to Digiland via
capitalisation of payables to Digiland to
provide additional working capital
RM1,728,000
3,500,000 shares of RM1
each
Issue of shares to Digiland via the
capitalisation of payables to Digiland
RM5,228,000
Issue of shares at par to Digiland for
cash to provide additional working
capital
US$1,741,936
30 June 2001
27 June 2001
Hong Kong:±
Trans Europe Computer Limited
30 June 2000
4,500,000 shares of HK$1
each
84
Date of
alteration
Number of ordinary
shares allotted/
(cancelled/redeemed)
Nature of alteration
Issued and paid up
share capital after
change
Australia:±
Digiland Pty Ltd
30 June 2000
10,000,000 shares of A$1
each
Issue of shares at par to Digiland via the
capitalisation of a trade balance due to
Digiland of A$10,000,000
A$11,100,000
15 March 2001
8,900,000 shares of A$1
each
capitalisation of trade balance due to
holding company
A$20,000,000
Digiland
Baht 122,000,000
Thailand:±
Digiland (Thailand) Co., Ltd
28 June 2001
Baht62,000,000
The People's Republic of China:±
Shanghai ECC-Digiland International Trading Co., Ltd.
30 June 2000
Ð
Registered capital of US$5,000,000 for
cash for incorporation
2,331,055 shares of 100
Pesos each(1)
Digiland
Rmb41,393,629
The Philippines:±
19 May 2001
309,761,938 Pesos
Note:±
(1) Pending approval from relevant authorities.
AUTHORITY FOR FURTHER ISSUANCE OF SHARES
Pursuant to the Demerger, our shareholders will authorise our Directors to allot and issue shares in our
Company at any time, upon such terms and conditions, whether for cash or otherwise, for such
purposes, to such persons and with such rights or restrictions as our Directors may deem ®t,
provided that (i) the aggregate number of shares to be issued pursuant to such authority shall not
exceed 50 per cent. of our issued share capital immediately prior to the proposed issue and (ii) the
aggregate number of shares to be issued other than on a pro rata basis to our then existing
shareholders shall not exceed 20 per cent. of our issued share capital immediately prior to the
proposed issue. Such authority is granted pursuant to Section 161 of the Companies Act. Unless
revoked or varied by our shareholders in a general meeting, such authority shall continue in force
until the conclusion of our next annual general meeting or the expiration of the period within which
our next annual general meeting is required by law to be held, whichever is earlier.
CHANGE IN CONTROL OF OUR COMPANY
Following the Demerger, Digiland will cease to be substantially held by GIL. Controlling interest in
Digiland will transfer to existing GIL shareholders and the substantial shareholders of Digiland will
mirror that of GIL.
85
MORATORIUM
The following persons have undertaken:(1)
not to transfer or otherwise dispose of any of the Digiland shares they would receive pursuant to
the Demerger (as set out against their names below) for a period of six months from the date of
Digiland's listing on the SGX-ST; and
(2)
not to transfer or otherwise dispose of more than 50 per cent. of those Digiland shares for a
further period of six months thereafter.
The number of Digiland shares comprised in these undertakings would be 238,709,495 Digiland
shares, representing approximately 33.3 per cent. of the issued share capital of Digiland after the
Demerger.
Number of Digiland Shares
Goh Lik Tuan(1)
Liew Kim Choo
(1)
Alxia Pte Ltd
Andatino Investments Ltd
Almon Bury Agents Limited(1),
(2), (3)
Total
Percentage of Digiland's
Issued Share Capital
64,817,136
9.0%
66,516,372
9.3%
1,146,720
0.2%
24,000,000
3.3%
82,211,174
11.5%
238,691,402
33.3%
Notes:±
(1) The number of GIL shares held by Goh Lik Tuan (``GLT''), Liew Kim Choo (``LKC'') and Almon Bury Agents Limited (`Àlmon
Bury''), and hence the number of Digiland shares which will be comprised in their individual undertakings, would change if
there should be a transfer of GIL shares between them before the Demerger. However, subject to Note (3) below, such
transfers would not affect the total number of GIL shares held by them, and hence the total number of Digiland shares
comprised in all their undertakings.
(2) Although Almon Bury holds 90,461,240 GIL shares as of the Latest Practicable Date, GLT's and LKC's aggregate bene®cial
interest amounted only to 82,211,174 of those shares. Hence, GLT's and LKC's aggregate bene®cial interest in Digiland
shares pursuant to the Demerger will amount only to 82,211,174 Digiland shares. The bene®cial interest in the remaining
Digiland shares will be held by Yeong Bou Wai, Daniel (``DY''), who will not be subject to moratorium under the SGX-ST
Listing Manual.
(3) Almon Bury had issued bonds due 2003 (the ``Bonds'') to Credit Suisse First Boston (Singapore) Limited (``CSFB''). The
Bonds are exchangeable, at the option of CSFB, into Almon Bury's GIL shares at any time during the term hereof. The
number of GIL shares to be exchanged for the Bonds depends on the exchange price of the Bonds as determined in
accordance with the terms and conditions of the Bonds. If and when CSFB exercises its option to exchange the Bonds
into Almon Bury's GIL shares, the number of GIL shares held by Almon Bury, and hence the number of Digiland shares
which Almon Bury would receive upon the Demerger, would be reduced accordingly.
To secure Almon Bury's obligations to deliver GIL shares to CSFB upon the exercise of the Bonds, each of GLT, LKC and
DY had contributed their GIL shares to Almon Bury in proportion to their respective shareholdings in Almon Bury. The GIL
shares are held in an escrow account and charged as security in favour of CSFB. While held by Almon Bury, each of GLT,
LKC and DY retains the bene®cial ownership of the GIL shares which he or she had contributed to Almon Bury.
86
TRANSACTIONS WITH AFFILIATES
INTERESTED PERSON TRANSACTIONS MANDATE
As a listed company on the SGX-ST, we will have to comply with the provisions of Chapter 9A of the
Listing Manual of the SGX-ST. Chapter 9A regulates transactions between (i) a listed company or any
of its subsidiaries and ``target associated companies'' and (ii) any of its `ìnterested persons''. A
company is one of our ``target associated companies'' where (i) we, by ourselves or together with
our interested persons, are its largest shareholder and (ii) it is not listed on a foreign stock exchange.
A person is one of our `ìnterested persons'' if (i) he is our director, chief executive of®cer or
substantial shareholder or (ii) an `àssociate'' of any such person. Where such person is an
individual, his `àssociate'' means (i) his immediate family, (ii) the trustees of any trust in which he or
his immediate family is a bene®ciary or discretionary object and (iii) any company in which he and his
immediate family together, directly or indirectly, have an interest of 25 per cent. or more. Where such
person is a corporation, its `àssociate'' means (i) any of its subsidiaries, holding companies or fellow
subsidiaries and (ii) any company in which it and/or any of its subsidiaries, holding companies or
fellow subsidiaries together, directly or indirectly, have an interest of 25 per cent. or more.
Under Chapter 9A, we must announce and/or obtain our shareholders' approval for an interested
person transaction if it exceeds certain materiality thresholds. If the value of an interested person
transaction:±
.
amounts to S$200,000 or more, but less than ®ve per cent., of our latest audited consolidated
NTA, we must announce the transaction and each subsequent transaction with such interested
person in the same ®nancial year; and
.
amounts to ®ve per cent. or more of our latest audited consolidated NTA when aggregated with
other transactions (excluding transactions that have been approved, or is the subject of
aggregation for another transaction that had been approved, by our shareholders) with the
same person within the same ®nancial year, we must announce and obtain our shareholders'
approval for the transaction.
We may from time to time enter into interested person transactions in the ordinary course of our business.
Under Chapter 9A, we may obtain a mandate from our shareholders (i) for recurrent interested person
transactions which are of a revenue or trading nature or (ii) for those necessary for our day-to-day
operation, but not in respect of the purchase or sale of assets, undertakings or businesses.
We intend to seek from our existing shareholders, a mandate for members of the Proforma Digiland
Group to enter into certain categories of interested person transactions with certain categories of
interested persons set out below, provided that all such transactions are made at arm's length and
on commercial terms (the ``Digiland IPT Mandate''). As such interested person transactions would
be made on a regular basis, the Digiland IPT Mandate will help us avoid the administrative time,
inconvenience and expense which would otherwise be required if we were to seek our shareholders'
approval for each potential interested person transaction. The Digiland IPT Mandate will be sought at
an Extraordinary General Meeting (`ÈGM'') of our Company (the ``Digiland EGM'') which will be held
after the EGM of GIL to be held to approve, among other things, the Demerger (the ``GIL EGM'') but
before the Demerger.
As GIL shareholders will become Digiland shareholders immediately after the Demerger, GIL will at the
GIL EGM ask the independent GIL shareholders to authorise it to vote in favour of the Digiland IPT
Mandate at the Digiland EGM in order to give the independent GIL shareholders the opportunity to
consider and approve the Digiland IPT Mandate. Given that GIL will hold approximately 99.7 per cent.
of the issued share capital of Digiland immediately prior to the Demerger, GIL's vote on the Digiland IPT
Mandate will be decisive. If the independent GIL shareholders at the GIL EGM authorise GIL to vote in
favour of the Digiland IPT Mandate at the Digiland EGM, the Digiland IPT Mandate would be adopted at
the Digiland EGM. Yeong Bou Wai, Daniel, our non-Executive Chairman and Lim Tow Cheng, our
Managing Director, who are common Directors of both GIL and Digiland, will abstain from
recommending or voting on the resolutions relating to the Digiland IPT Mandate at both the GIL EGM
and the Digiland EGM. Should the independent GIL shareholders not approve GIL to vote in favour of
the Digiland IPT Mandate, we must announce and/or obtain our shareholders' approval for any
interested party transactions if it exceeds the materiality thresholds set out above resulting in additional
administrative time, incovenience and expense.
87
BACKGROUND: RELATIONSHIP WITH THE GIL GROUP
As we are a subsidiary of GIL before the Demerger, there have historically been inter-company
transactions between our respective companies as described below. These transactions would be
treated as `ìnterested person transactions'' had we then been listed on the SGX-ST.
PROFORMA HISTORICAL INTERESTED PERSON TRANSACTIONS: REVENUES AND EXPENSES
We set forth below a summary of our interested person transactions on a proforma basis for FY1999,
FY2000 and FY2001. These numbers have been prepared on the bases and assumptions set out at
pages 112 and 113 of the Accountant's Report set out in Annex A. Shareholders should take note that
these numbers are strictly proforma and actual balances may differ substantially.
Nature of Transaction
1999
2000
2001
(S$'000)
(S$'000)
(S$'000)
10,116
82,937
14,423
2,762
4,630
2,000
217,009
198,838
65,665
1,876
2,699
2,763
Revenues
. Sales of IT Products by our Company to the GES Group
. Provision of after-sales support and e-commerce services by our
Proforma Group to the GES Group
Expenses
. Purchases of IT Products by our Proforma Group from the GES Group
. Other items
We have entered into these transactions on the basis that these were inter-company transactions
within the GIL Group. Accordingly, we have enjoyed certain bene®ts not made available to third
parties transacting with the GIL Group (for instance, our trade payables remaining outstanding after
the relevant credit periods were generally carried forward and reclassi®ed as non-trade balances).
REVENUES
Sales of IT Products by our Company to the GES Group
We supply certain IT Products to the GES Group in the ordinary course of our business. These
products are purchased by GES and bundled together with its Datamini products for sales to its
customers. The sales of these products accounted for approximately 1.1 per cent. 7.6 per cent. and
1.3 per cent. of our proforma consolidated turnover for FY1999, FY2000 and FY2001, respectively.
Provision of after-sales support and e-commerce services by our Proforma Group to the GES
Group
We provide certain after-sales support and e- services to the GES Group in the ordinary course of our
business. After-sales support services consist mainly of repairs and maintenance services for
products manufactured by the GES Group. E-services consist mainly of information technology,
communication and e-commerce solutions and services provided by Infonet and Aspiren. In
aggregate, the provisions of these services accounted for less than 3.0 per cent. of our proforma
consolidated turnover for each of FY1999, FY2000 and FY2001.
88
EXPENSES
Purchases of IT Products by our Proforma Group from the GES Group
We formerly purchased IT Products from the GES Group for distribution in the ordinary course of our
business. These products consisted mainly of Datamini, Hewlett Packard and Hitachi computers and
DMC peripherals manufactured by the GES Group. However, with the scaling down of the computer
manufacturing business of GES over the past year, the volume of these transactions has reduced
signi®cantly. Currently, only DMC peripherals are purchased by us from GES.
The Datamini products purchased from GES are semi-®nished products which we will con®gure with
the relevant CPU, hard-disk drive, memory chips and CD-ROMs drives upon con®rmation of our
reseller customer's orders. We also purchase our CPU, hard-disk drive, memory chips and CD-ROM
requirements from the GES Group for con®guration with the Datamini semi-®nished products. The
purchases of these products accounted for approximately 23.3 per cent., 18.8 per cent. and 6.2 per
cent. of our proforma consolidated purchases for FY1999, FY2000 and FY2001, respectively.
Other Items
These other items consist of (i) our purchases of certain software and motor vehicles from the GES
Group, (ii) the interest payable on a loan made by GES to Digiland Indonesia (iii) the lease of of®ces
and a distribution centre in Malaysia and (iv) the notional rental of the premises at 14 Sungei Kadut
Avenue from GES (as we are a subsidiary of GIL prior to the Demerger, we have not actually paid
any rental for these premises. For the purposes of the proforma adjustments, the actual depreciation
charges in respect of these premises were taken to be the notional rental). In aggregate, these items
accounted for less than 0.3 per cent. of our proforma consolidated purchases for FY1999, FY2000
and FY2001.
PROFORMA HISTORICAL INTERESTED PERSON TRANSACTIONS: OUTSTANDING BALANCES
In addition to the interested person transactions described above, we have also made certain
advances to, and received certain advances from, GIL and the GES Group. We set forth below a
summary of the net proforma outstanding amounts owing by our Proforma Group to GIL and the
GES Group, and vice versa, arising from such transactions and from such advances as at FY1999,
FY2000 and FY2001. These numbers have been prepared on the bases and assumptions set out at
pages 112 and 113 of the Accountant's Report set out in Annex A. Shareholders should take note that
these numbers are strictly proforma and actual balances may differ substantially.
Outstanding Balances
1999
(S$'000)
2000
(S$'000)
2001
(S$'000)
Balance owing from our Proforma Group to GIL and
the GES Group
39,385
63,799
72,658
89
AMOUNTS OWING FROM THE PROFORMA DIGILAND GROUP TO GIL AND THE GES GROUP
Outstanding Balances
These arise from the Proforma Digiland Group's purchases of IT Products from the GES Group for
distribution in the ordinary course of their business. The credit period the Proforma Digiland Group
enjoyed from the GES Group was 90 days from date of invoice. This credit period is the average
credit period given to the GES Group's customers. See ``Purchases of IT Products by our Company
from the GES Group'' above. Going forward, such balances shall be paid as and where they fall due,
subject to the credit period of 90 days from date of invoice, and shall be subject to review as set out
below.
HISTORICAL INTERESTED PERSON TRANSACTIONS: GUARANTEES
Prior to the Demerger, the GIL Group managed all of its treasury functions centrally. By pooling its
®nancing resources, the GIL Group made more ef®cient use of its resources as well as achieved
cost savings. These ®nancing arrangements required certain companies within the GIL Group to
enter into cross guarantee arrangements. These arrangements involved GIL and GES entering into
®nancing and credit arrangements with various ®nancial institutions under which certain proceeds of
such ®nancings or certain lines of ®nance were made available to the Proforma Digiland Group as a
subsidiary of GIL or as a sister company of GES, respectively, which as of 30 June 2001 included
guaranteed bank overdrafts with banks in Singapore, in the amount of S$20.9 million (i.e. DBS Bank,
Deutsche Bank and OUB). Please refer to section entitled ``Capital resources'' on page 49 of this
Document for further details. As at 31 December 2001, our obligations guaranteed by GIL and GES
amounted to S$17.7 million.
As part of the Demerger, we have undertaken with GIL and GES to discharge them from their
guarantees within six months of the listing of our ordinary shares on the SGX-ST and to indemnify
them against any claims that may arise from any of the transactions discussed above that they may
have to pay thereunder.
The Proforma Digiland Group has reached an understanding with the various ®nancial institutions and
vendors to whom GIL or GES have given guarantees that they will discharge these guarantees
following Digiland's listing on the SGX-ST.
NO OTHER INTERESTED PERSON TRANSACTIONS
Save as disclosed above, we have not entered into any other interested person transactions prior to
the Demerger.
ON-GOING INTERESTED PERSON TRANSACTIONS AFTER THE DEMERGER
We expect to enter into the interested person transactions described below in the ordinary course of
our business after the Demerger. We will enter into these transactions on an arm's length basis and on
normal commercial terms. These transactions will also be subject to review by our Audit Committee
and the safeguard measures under our interested person transactions mandate as described below.
CATEGORIES OF INTERESTED PERSON TRANSACTIONS
The mandate covers the following categories of transactions:±
.
the purchases of IT Products by the Proforma GIL Group from the Proforma Digiland Group in
the ordinary course of our business;
.
the supply of after-sales support and e-services by the Proforma Digiland Group to the Proforma
GIL Group in the ordinary course of our business;
.
sales of IT Products by the GES Group to the Proforma Digiland Group for distribution in the
ordinary course of their business;
90
.
the provision of certain services between the Proforma GIL Group and by the Proforma Digiland
Group such as services relating to management information systems and systems integration
services. We have entered into a master services agreement with Digiland in relation to such
services; and
.
the lease of the premises at 14 Sungei Kadut Avenue.
MASTER SERVICES AGREEMENT
We have entered into a master services agreement (``Master Agreement') with GIL, renewable on a
yearly basis, in relation to, among other things:±
.
.
the provision of services by Aspiren to any company in the Proforma GIL Group:±
(a)
to maintain the management information systems used by such companies; and
(b)
to make recommendations for improvement to such systems,
the provision of services by Infonet to any company in the Proforma GIL Group:±
(a)
to maintain the systems integration equipment used by such companies;
(b)
to make recommendations for improvement to such equipment; and
(c)
to provide suitably quali®ed personnel for system integration functions of such companies.
In consideration of the services to be performed under the Master Agreement, the Proforma GIL
Group has to pay Digiland either:±
(1)
a fee (``Fee''), payable on a quarterly basis; or
(2)
an hourly rate, payable upon receipt of invoice.
The Fee is charged in relation to the provision of full-time personnel and maintenance services to the
Proforma GIL Group for a speci®ed period of time. The Fee charged to the Proforma GIL Group is
based on one or more of the following, where applicable:±
.
all direct costs incurred by the Proforma Digiland Group in respect of services provided solely for
the benefit of the Proforma GIL Group, including salaries and expenses of staff who are assigned
to the Proforma GIL Group on a full time basis;
.
an apportionment of the total indirect expenses incurred by Digiland in respect of the services
provided to the Proforma GIL Group based on the estimated time spent in providing such
services; and
.
a reasonable mark-up on the direct and indirect costs incurred.
For ad-hoc services rendered to the Proforma GIL Group, we will charge the Proforma GIL Group on
an hourly rate basis which is based on how Digiland charges to third parties for similar services.
CATEGORIES OF INTERESTED PERSONS
The mandate covers the following interested persons:±
.
substantial shareholders of GIL who will also be our substantial shareholders;
.
our Directors; and
.
the associates of any of the persons above (including, without limitation, the Proforma GIL Group).
SCOPE OF MANDATE
Interested person transactions which do not fall within the ambit of the mandate will be subject to
Chapter 9A (see `Òther Interested Person Transactions'' below). The mandate will continue in force
until the next annual general meeting of our shareholders. We will seek the approval of our
shareholders for the renewal of the mandate at that meeting and each subsequent annual general
meeting, subject to satisfactory review by our Audit Committee of its continued applicability.
91
REVIEW PROCEDURES FOR INTERESTED PERSON TRANSACTIONS
The mandate requires our Audit Committee to review all such transactions to ensure that they are (i)
made at arm's length, (ii) on normal commercial terms for comparable transactions, if any, and (iii) are
not prejudicial to our shareholders by adopting the following procedures:±
.
our sales of IT Products to the Proforma GIL Group in the ordinary course of our business
The trade and credit terms extended to the Proforma GIL Group will be reviewed yearly by
comparing them against those of similar transactions, (including pricing) with third parties, so
that the trade and credit terms extended to the Proforma GIL Group are no more favourable or
worse off than those extended by us to third parties.
.
our supply of after-sales support and e-services to the Proforma GIL Group in the ordinary
course of our business
The trade and credit terms extended to the Proforma GIL Group will be reviewed yearly by
comparing them against those extended to third parties for similar services (including pricing),
so that the trade and credit terms extended to the Proforma GIL Group are no more favourable
or worse off than those extended by us to third parties.
.
our purchases of IT Products from the GES Group for distribution in the ordinary course of our
business
To ensure that our purchases of IT Products from the GES Group are at arm's length and of
normal commercial terms, we will obtain quotations from third-party vendors of similar goods.
In the event that such comparisons cannot be obtained (for instance, if there are no third-party
vendors of similar goods), our management will then assess if the commercial terms are
reasonable based on past market demand trends. Market demand trends will indicate if such
purchases are appropriately priced as these IT Products purchased by us are meant for our
distribution sales.
.
the provision of certain services between the Proforma GIL Group and our Proforma Group
pursuant to the Master Agreement
The Audit Committee is obliged to ensure that the Fee is charged in accordance with the terms
of the Master Agreement. Pursuant to the Master Agreement,
.
(1)
the Audit Committee shall be provided with a list of the fees and charges covered under the
Master Agreement with details on the nature of fees and charges, the amount of each item
of fees and charges before allocation, the bases of allocation and such other relevant
information which it may reasonably require;
(2)
the Audit Committee will review the information supplied to ensure that the allocation of
fees and charges is fair and reasonable and the allocation bases are applied consistently;
(3)
the Audit Committee shall review the hourly charge rates to the Proforma GIL Group by
comparing them against those extended to third parties for similar services to ensure that
the rates extended by us are no more favourable or worse off than those extended by us to
third parties;
(4)
both GIL and Digiland are obliged to give their full co-operation to provide the Audit
Committee with any further information which it requires to discharge its responsibilities;
and
(5)
the Audit Committee shall, when it deems necessary, have the right to require the
appointment of the auditors or any independent professional to review the Fee.
the lease of the premises at 14 Sungei Kadut Avenue
To ensure that the lease is at arm's length and of normal commercial terms, we will obtain
quotes in respect of of®ce and distribution centres in Singapore which are of similar
speci®cations to the premises at 14 Sungei Kadut Avenue from an independent real estate
agent.
92
If a member of our Audit Committee has an interest in the relevant transaction, he will abstain from the
deliberations of our Audit Committee with respect to that transaction. Our Audit Committee has the
overall responsibility to determine the necessary and appropriate safeguard procedures, with the
authority to delegate to individuals within our Company as it deems appropriate.
Our Audit Committee will carry out half-yearly reviews to ascertain whether such procedures have
been complied with. Further, if during these periodic reviews, our Audit Committee is of the view that
such safeguard procedures are not suf®cient to ensure that interested person transactions are made
at arm's length, on normal commercial terms and are not prejudicial to our shareholders, we will revise
such safeguard procedures in accordance with the recommendations of our Audit Committee and will
seek a fresh mandate from our shareholders based on such revised safeguard procedures.
STATEMENT FROM AUDIT COMMITTEE
Our Audit Committee has reviewed the terms of our interested person transactions mandate. Our
Audit Committee is satis®ed that the safeguard procedures and periodic reviews for such
transactions are suf®cient to ensure that such transactions will be made at arm's length, on normal
commercial terms and are not prejudicial to our shareholders.
OTHER INTERESTED PERSON TRANSACTIONS
With respect to other interested person transactions which fall outside the scope of the Digiland IPT
Mandate, we will implement the following review and approval or safeguard procedures:±
.
our Audit Committee will review and approve an interested person transaction with a value of
S$200,000 or more, but less than five per cent., of our latest audited consolidated NTA. Our
Audit Committee may request additional information or advice relating to the transaction from
independent sources or advisers.; and
.
shareholders' approval will be required for any interested person transaction with a value of ®ve
per cent. or more of our latest audited consolidated NTA when aggregated with other
transactions (excluding transactions that have been approved, or is the subject of aggregation
for another transaction that had been approved, by our shareholders) with the same person
within the same ®nancial year.
TRANSACTIONS WITH ASSOCIATED COMPANIES AND OTHER AFFILIATES
We have also supplied certain IT Products to our associated companies, Khidmat Komputer and estation, and to our af®liated companies, PT Istidata Prima and Australian Consumable Supplier Pty
Ltd. PT Istidata Prima and Australian Consumable Supplier Pty Ltd are owned by our local business
partners in Indonesia and Australia, respectively. The sales of these products accounted for
approximately 2.4 per cent. (S$22.4 million), 3.6 per cent. (S$38.9 million) and 3.5 per cent. (S$38.6
million) of our proforma consolidated turnover for FY1999, FY2000 and FY2001 respectively.
In addition, we have also entered into an agreement with Shanghai East-China Computer Technology
Co. Ltd. (`ÈCCT''), a subsidiary of ECC, in March 2000 to carry out warehousing, delivery, logistics
and after-sales services for Digiland China. This arrangement does not constitute an `ìnterested
person transaction'' for the purposes of Chapter 9A of the SGX-ST Listing Manual.
93
DESCRIPTION OF ORDINARY SHARES
The following statements are brief summaries of our capital structure and of the more important rights
and privileges of our shareholders as conferred by the laws of Singapore and our new Articles of
Association (`Àrticles'') which shall be adopted upon the conversion of our Company into a public
company. These statements are quali®ed in entirety by reference to our Articles, a copy of which will
be available for inspection at our registered of®ce in Singapore during normal business hours for a
period of six months from the date of this Document.
ORDINARY SHARES
Our authorised capital is S$225,000,000 consisting of 1,500,000,000 ordinary shares of par value
S$0.15 each. We have only one class of shares, namely, our ordinary shares, which have identical
rights in all respects and rank equally with one another. Our Articles provide that we may issue
shares of a different class with such preferential, deferred, quali®ed or special rights, privileges or
conditions as our Board of Directors may think ®t and we may issue preference shares which are, or
at our option are, redeemable, subject to certain limitations. Our Board of Directors may issue shares
at a premium. If shares are issued at a premium, a sum equal to the aggregate amount or value of the
premium will, subject to certain exceptions, be transferred to a share premium account.
As at 10 January 2001, 716,501,597 ordinary shares have been issued and fully paid. Fully paid
ordinary shares are not subject to any further capital calls by our Company. All of our ordinary
shares are in registered form. We may, subject to the provisions of the Companies Act and the rules
of the SGX-ST, purchase our ordinary shares. However, we may not, except in circumstances
permitted by the Companies Act, grant any ®nancial assistance for the acquisition or proposed
acquisition of our ordinary shares.
NEW ORDINARY SHARES
New ordinary shares may only be issued with the prior approval of our shareholders in a general
meeting.
The aggregate number of shares to be issued pursuant to such approval may not exceed 50 per cent.
(or such other limit as may be prescribed by the SGX-ST) of our issued share capital for the time
being, of which the aggregate number of shares to be issued other than on a pro rata basis to our
shareholders may not exceed 20 per cent. (or such other limit as may be prescribed by the SGX-ST)
of our issued share capital for the time being.
The approval, if granted, will lapse at the conclusion of our annual general meeting following the date
on which the approval was granted. Subject to the foregoing, the provisions of the Companies Act
and any special rights attached to any class of shares currently issued, all new ordinary shares are
under the control of our Board of Directors, who may allot and issue the same with such rights and
restrictions as they may think ®t.
SHAREHOLDERS
Only persons who are registered on our register of shareholders and, in cases in which the person so
registered is the CDP, the persons named as the depositors in the depository register maintained by
the CDP for our ordinary shares, are recognised as our shareholders. We will not, except as required
by law, recognise any equitable, contingent, future or partial interest in any ordinary share or other
rights for any ordinary share other than the absolute right thereto of the registered holder of that
ordinary share or of the person whose name is entered in the depository register for that ordinary
share. We may close our register of shareholders at any time or times if we provide the RCB with at
least 14 days' notice and the SGX-ST with at least 10 clear market days' notice. However, the register
may not be closed for more than 30 days in aggregate in any calendar year. We typically close the
register to determine our shareholders' entitlement to receive dividends and other distributions.
94
TRANSFER OF ORDINARY SHARES
There is no restriction on the transfer of our fully paid ordinary shares except where required by law or
the listing rules or the rules or by-laws of any stock exchange on which we are listed. Our Board of
Directors may decline to register any transfer of ordinary shares which are not fully paid shares or
ordinary shares on which we have a lien. Our ordinary shares may be transferred by a duly signed
instrument of transfer in a form approved by our Board of Directors and any stock exchange on
which we are listed. Our Board of Directors may also decline to register any instrument of transfer
unless, among other things, it has been duly stamped and is presented for registration together with
the share certi®cate and such other evidence of title as they may require. We will replace lost or
destroyed certi®cates for our ordinary shares if we are properly noti®ed and the applicant pays a fee
which will not exceed S$1.00, together with the amount of the proper duty with which such share
certi®cate is chargeable under any law for the time being in force relating to stamps and furnishes
any evidence and indemnity that our Board of Directors may require.
GENERAL MEETINGS OF SHAREHOLDERS
We are required to hold an annual general meeting every year. Our Board of Directors may convene an
extraordinary general meeting whenever it thinks ®t and must do so if shareholders representing not
less than 10 per cent. of the total voting rights of all shareholders request in writing that such a
meeting be held. In addition, two or more shareholders holding not less than 10 per cent. of our
issued share capital may call a meeting. Unless otherwise required by law or by our Articles, voting
at general meetings is by ordinary resolution, requiring an af®rmative vote of a simple majority of the
votes cast at that meeting. An ordinary resolution suf®ces, for example, for the appointment of
directors. A special resolution, requiring the af®rmative vote of at least 75 per cent. of the votes cast
at the meeting, is necessary for certain matters under Singapore law, including voluntary winding up,
amendments to our Memorandum of Association and our Articles, a change of our corporate name
and a reduction in our share capital, share premium account or capital redemption reserve fund. We
must give at least 21 days' notice in writing for every general meeting convened for the purpose of
passing a special resolution. Ordinary resolutions generally require at least 14 days' notice in writing.
The notice must be given to each of our shareholders who has supplied us with an address in
Singapore for the giving of notices and must set forth the place, the day and the hour of the meeting
and, in the case of special business, the general nature of that business.
VOTING RIGHTS
A holder of our ordinary shares is entitled to attend, speak and vote at any general meeting, in person
or by proxy. Proxies need not be a shareholder. A person who holds our ordinary shares through the
SGX-ST book-entry settlement system will only be entitled to vote at a general meeting as a
shareholder if his name appears on the depository register maintained by the CDP 48 hours before
the general meeting. Except as otherwise provided in our Articles, two or more shareholders must be
present in person or by proxy to constitute a quorum at any general meeting. Under our Articles, on a
show of hands, every shareholder present in person or by proxy shall have one vote (provided that, in
the case of a shareholder who is represented by two proxies, only one of the two proxies as
determined by that shareholder or, failing such determination, by the chairman of the meeting in his
sole discretion shall be entitled to vote on a show of hands), and on a poll, every shareholder present
in person or by proxy shall have one vote for each ordinary share which he holds or represents. A poll
may be demanded in certain circumstances, including by the chairman of the meeting or by any
shareholder present in person or by proxy and representing not less than 10 per cent. of the total
voting rights of all shareholders having the right to attend and vote at the meeting or by any two
shareholders present in person or by proxy and entitled to vote. In the case of a tied vote, whether
on a show of hands or a poll, the chairman of the meeting shall be entitled to a casting vote.
95
DIVIDENDS
We may declare dividends by ordinary resolution of our shareholders at a general meeting, but we
may not pay dividends in excess of the amount recommended by our Board of Directors. We must
pay all dividends out of our pro®ts; however, we may capitalise our share premium account and
apply it to pay dividends, if such dividends are satis®ed by the issue of shares to our shareholders.
See ``Bonus and Rights Issue''. Our Board of Directors may also declare an interim dividend. All
dividends are paid pro rata amongst our shareholders in proportion to the amount paid up on each
shareholder's ordinary shares, unless the rights attaching to an issue of any share provide otherwise.
Unless otherwise directed, dividends are paid by cheque or warrant sent through the post to each
shareholder at his registered address. Notwithstanding the foregoing, the payment by us to the CDP
of any dividend payable to a shareholder whose name is entered in the depository register shall, to the
extent of payment made to the CDP, discharge us from any liability to that shareholder in respect of
that payment.
BONUS AND RIGHTS ISSUE
Our Board of Directors may, with the approval of our shareholders at a general meeting, capitalise any
reserves or pro®ts (including pro®ts or moneys carried and standing to any reserve or to the share
premium account) and distribute the same as bonus shares credited as paid-up to our shareholders in
proportion to their shareholdings. Our Board of Directors may also issue rights to take up additional
ordinary shares to other shareholders in proportion to their shareholdings. Such rights are subject to
any conditions attached to such issue and the regulations of any stock exchange on which we are listed.
VARIATION OF RIGHTS
Under our Articles, the rights attached to any class of our shares may be varied or abrogated either
with the consent in writing of the holders of three-quarters in nominal value of the issued shares of
that class or with the sanction of a special resolution passed at a separate general meeting of the
holders of the shares of that class. The quorum for such separate general meeting is two persons
holding or representing by proxy at least one-third in nominal value of the issued shares of that
class. Any holder of shares of that class may demand a poll and every such holder shall on a poll
have one vote for every share of that class held by him. Where the necessary majority for a special
resolution is not obtained at such general meeting, consent in writing from the holders of threequarters in nominal value of the issued shares of that class obtained within two months of such
general meeting shall be as valid and effectual as a special resolution carried at such general meeting.
TAKEOVERS
The Securities and Futures Act 2001 and the Singapore Code on Take-overs and Mergers (the
``Takeover Code'') regulate the acquisition of ordinary shares of public companies and contain
certain provisions that may delay, deter or prevent a future takeover or change in control of our
Company. Any person acquiring an interest, either on his own or together with parties acting in
concert with him, in 30 per cent. or more of our voting shares must extend a takeover offer for the
remaining voting shares in accordance with the provisions of the Takeover Code.
``Parties acting in concert'' includes a company and its related and associated companies; a company
and its directors (including their close relatives, related trusts and companies controlled by any of the
directors, their close relatives and related trust); a company and its pension funds and employee share
schemes; a person and any investment company, unit trust or other fund whose investment such
person manages on a discretionary basis; a ®nancial or other professional adviser and its client in
respect of shares held by the ®nancial or other professional adviser and persons controlling,
controlled by or under the same control as the advisor and shares in the client held by funds
managed by the ®nancial adviser on a discretionary basis which total 10% or more of the client's
equity shares capital; directors of a company (including their close relatives, related trusts and
companies controlled by any of such directors, their close relatives and related trusts) which is
subject to an offer or where the directors have reason to believe a bona ®de offer for the company
may be imminent; partners; and an individual (including his close relatives, related trusts, any person
who is accustomed to act in accordance with his instructions and companies controlled by the
individual, his close relatives, his related trusts or any person who is accustomed to act in
accordance with his instructions.
96
An offer for consideration other than cash must, subject to certain exceptions, be accompanied by a
cash alternative at not less than the highest price paid by the offeror or parties acting in concert with
the offeror within the preceding 6 months. A mandatory takeover offer is also required to be made if a
person holding, either on his own or together with parties acting in concert with him, between 30 per
cent. and 50 per cent. (both inclusive) of our voting shares acquires additional voting shares
representing more than 1 per cent. of our voting shares in any 6-month period.
LIQUIDATION OR OTHER RETURN OF CAPITAL
If we liquidate or in the event of any other return of capital, holders of our ordinary shares will be
entitled to participate in any surplus assets in proportion to their shareholdings, subject to any
special rights attaching to any other class of shares.
INDEMNITY
Our Articles provide that, subject to the Companies Act, we may indemnify our Directors and of®cers
against any liability incurred in defending any proceedings, whether civil or criminal, which relate to
anything done or omitted to be done as an of®cer, director or employee and in which judgment is
given in their favour or in which they are acquitted or in connection with any application under any
statute for relief from liability in respect thereof in which relief is granted by the court. We may not
indemnify our Directors and of®cers against any liability which by law would otherwise attach to
them in respect of any negligence, default, breach of duty or breach of trust of which they may be
guilty in relation to us.
LIMITATIONS ON RIGHTS TO HOLD OR VOTE SHARES
Except as described in ``Voting Rights'' and ``Takeovers'' above, there are no limitations imposed by
Singapore law or by our Articles on the rights of non-resident shareholders to hold or vote our ordinary
shares.
DIRECTORS
Under our Articles, our Directors may not vote in respect of any contract or arrangement or any other
proposal whatsoever in which he has any interest, directly or indirectly. A Director shall not be counted
in the quorum at a meeting in relation to any resolution on which he is debarred from voting. Subject
to these provisions, a Director may be party to or in any way interested in any contract or arrangement
or transaction to which our Company is a party.
The remuneration payable to our Directors for acting in such capacity is determined by our
shareholders in general meeting. We may not increase such remuneration without the approval of
our shareholders in general meeting. Subject to these provisions, our Directors may appoint one or
more of their body to hold any executive of®ce on such terms and for such period as they may,
subject to applicable law, determine. Our Directors may pay extra remuneration to such executive
Directors by way of salary, commission or otherwise as the Directors may determine.
Under our Articles, our Directors may, subject to applicable law, exercise all the powers of our
Company to borrow money, to mortgage or charge our undertaking, property and uncalled capital
and to issue debentures and other securities, whether outright or as collateral security for any debt,
liability or obligation of our Company or of any third party. These borrowing powers may be varied in
the same way as other provisions under our Articles. See ``Variation of Rights''.
Under the Companies Act, a Director who has reached the age 70 shall cease to be our Director at the
annual general meeting of our shareholders after his 70th birthday. Such person, and any other person
of or over the age of 70 years, may be appointed or re-appointed as our Directors by a resolution
passed by a majority of not less than three-fourths of our shareholders. His appointment shall
continue until our next annual general meeting.
Our Articles do not require our Directors to hold any of our shares by way of quali®cation. A Director
who is not a member of our Company shall nevertheless be entitled to attend and speak at general
meetings of our shareholders.
97
At each annual general meeting, one-third of our Directors (other than any Director holding of®ce as
our Managing Director) for the time being shall retire from of®ce by rotation, the longest in of®ce to
retire ®rst. A retiring Director is eligible for re-election. Singapore law does not currently permit any
cumulative voting on the appointment of Directors.
SUBSTANTIAL SHAREHOLDINGS
Under the Companies Act, a person has a substantial shareholding in a company if he has an interest
(or interests) in voting shares in the company and the aggregate nominal amount of those shares is
not less than ®ve per cent. of the aggregate nominal amount of all the voting shares in the company.
A substantial shareholder is required to make certain disclosures under the Companies Act, including
particulars of his interests and any changes to his interests. There are no provisions under our Articles
which discriminate against any existing or prospective holder of our ordinary shares as a result of such
holder owing a substantial number of our ordinary shares.
MINORITY RIGHTS
The rights of minority shareholders of Singapore-incorporated companies are protected under Section
216 of the Companies Act, which gives the Singapore courts a general power to make any order,
upon application by any of our shareholders, as they think fit to remedy any of the following
situations:±
.
our affairs are being conducted or the powers of our Board of Directors are being exercised in a
manner oppressive to, or in disregard of the interests of, one or more of the shareholders; or
.
we take an action, or threaten to take an action, or our shareholders pass a resolution, or
propose to pass a resolution, which unfairly discriminates against, or is otherwise prejudicial to,
one or more of our shareholders, including the applicant.
Singapore courts have a wide discretion as to the reliefs they may grant and those reliefs are in no
way limited to those listed in the Companies Act itself. Without prejudice to the foregoing, Singapore
courts may:±
.
direct or prohibit any act or cancel or vary any transaction or resolution;
.
regulate the conduct of our affairs in the future;
.
authorise civil proceedings to be brought in our name, or on our behalf, by a person or persons
and on such terms as the court may direct;
.
provide for the purchase of a minority shareholder's shares by our other shareholders or by us
and, in the case of a purchase of shares by us, a corresponding reduction of our share capital;
.
provide that our Memorandum of Association or our Articles be amended; or
.
provide that we be wound up.
98
CLEARANCE AND SETTLEMENT
Upon listing and quotation on the SGX-ST, our Shares will be traded under the book-entry settlement
system of CDP. All dealings in and transactions of our Shares through the SGX-ST will be effected in
accordance with the terms and conditions for the operation of securities accounts with the CDP, as
amended from time to time.
Our Shares will be registered in the name of CDP or its nominee and held by CDP for and on behalf of
persons who maintain, either directly or through depository agents, securities accounts with CDP.
Persons named as direct securities account holders and depository agents in the depository register
maintained by CDP, rather than CDP itself, will be treated, under the Companies Act and our Articles
of Association, as our members in respect of the number of Shares credited to their respective
securities accounts.
Persons holding our Shares in a securities account with CDP may withdraw the number of Shares
they own from the book-entry settlement system in the form of physical share certi®cates. Such
share certi®cates will not, however, be valid for delivery pursuant to trades transacted on the SGXST, although they will be prima facie evidence of title and may be transferred in accordance with our
Articles of Association. A fee of S$10.00 for each withdrawal of 1,000 Shares or less and a fee of
S$25.00 for each withdrawal of more than 1,000 Shares is payable. In addition, a fee of up to S$2.00
may be payable to our Share Registrar for each share certi®cate issued. Stamp duty, subject to a 30
per cent. reduction on all instruments executed on or after the October 13, 2001 until end of 2002
pursuant to the Off-Budget measures announced by the Government of Singapore on October 12,
2001, of S$10.00 is also payable where our Shares are withdrawn in the name of the person
withdrawing our Shares, or S$0.20 per S$100.00 or part thereof of the last-transacted price where
our Shares are withdrawn in the name of a third party. Persons holding physical share certi®cates
who wish to trade on the SGX-ST must deposit with CDP their share certi®cates together with the
duly executed and stamped instruments of transfer in favour of CDP, and have their respective
securities accounts credited with the number of Shares deposited before they can effect the desired
trades. A fee of S$20.00 is payable upon the deposit of each instrument of transfer with CDP.
Transactions in our Shares under the book-entry settlement system will be re¯ected by the seller's
securities account being debited with the number of Shares sold and the buyer's securities account
being credited with the number of Shares acquired. No transfer stamp duty is currently payable for
Shares that are settled on a book-entry basis.
A Singapore clearing fee for trades in Shares on the SGX-ST is payable at the rate of 0.05 per cent. of
the transaction value. The clearing fee, instrument of transfer deposit fees and share withdrawal fee
may be subject to Singapore Goods and Services Tax of 3 per cent.
Dealings in Shares will be carried out in Singapore dollars and will be effected for settlement in CDP
on a scripless basis. Settlement of trades on a normal ``ready'' basis on the SGX-ST generally takes
place on the third Market Day following the transaction date, and payment for the securities is
generally settled on the following day. CDP holds securities on behalf of investors in securities
accounts. An investor may open a direct account with CDP or a sub-account with a depository
agent. A depository agent may be a member company of the SGX-ST, bank, merchant bank or trust
company.
99
ANNEX A
ACCOUNTANTS' REPORT
15 January 2002
The Board of Directors
Singapore 729650
Dear Sirs,
A.
INTRODUCTION
This report has been prepared for inclusion in the Document dated 15 January 2002 in
connection with the Introduction of Digiland International Limited (the ``Company'') to the
Singapore Exchange Securities Trading Limited (``SGX-ST'').
B.
THE COMPANY
The Company, incorporated in Singapore on 25 January 1994 as a private limited company
under the name of Digiland Pte Ltd, was a subsidiary of GES International Limited (``GIL''), a
company incorporated in Singapore and listed on the SGX-ST and the Australian Stock
Exchange Limited. The Company changed its name to Digiland Singapore Pte Ltd on 14
February 1995, to Digiland International Pte Ltd on 29 June 1999, to Digiland.com International
Pte Ltd on 9 September 1999 and to Digiland International Pte Limited on 25 September 2000.
The Company's principal activities are the trading of computers, computer peripherals and
accessories.
The movements in the authorised share capital of the Company since the date of incorporation
to the date of this report are as follows:±
Authorised share capital of S$1 each
Authorised
share created
Date of share creation
S$'000
25 January 1994 (date of incorporation)
100,000
100
29 March 1996
900,000
900
1,000,000
1,000
98,000,000
98,000
10 January 2002
125,000,000
125,000
As at 15 January 2002
225,000,000
225,000
21 June 1999
28 March 2000
At an Extraordinary General Meeting held on 10 January 2002, the shareholders of the Company,
approved, inter alia, the subdivision of 1 ordinary share of S$1.00 into 20 ordinary shares of
S$0.05 each in the authorised share capital of the Company and immediately thereupon the
consolidation of 3 ordinary shares of S$0.05 each into 1 ordinary share of par value S$0.15 each.
100
B.
THE COMPANY (cont'd)
The movements in the issued and paid-up share capital of the Company since the date of
incorporation to the date of this report are as follows:±
Date of share issue
25 January 1994
(Date of incorporation)
Ordinary
shares of S$1
each issued
S$'000
Consideration/Purpose
2
Ð*
Subscriber's shares of S$1 each
29 March 1996
999,998
1,000
Issued at par for cash for working
capital purpose
28 March 2000
1,500,000
1,500
Bonus issue of new ordinary shares at
par via capitalisation of revenue
reserves
28 March 2000
3,500,000
3,500
Issue of new ordinary shares at par via
capitalisation of amount owing to its
holding company, GIL
28 March 2000
470,000
470
Issue of new ordinary shares at S$1.07
per share to certain management
members in recognition of their
contribution to the success and
development of the Company and its
subsidiaries and associated
companies
16 June 2001
31,530,000
31,530
Issue of new ordinary shares at par via
capitalisation of amount owing to GIL
10 January 2002
27,000,000
27,000
Issue of new ordinary shares at
S$1.185 per share for cash for working
capital purpose
65,000,000
65,000
*Amount less than S$1,000
At an Extraordinary General Meeting held on 10 January 2002, the shareholders of the Company
approved, inter alia, the following:±
(a)
the subdivision of 1 ordinary share of S$1.00 each into 20 ordinary shares of par value
S$0.05 each in the issued share capital of the Company;
(b)
the issue of 849,504,791 ordinary shares of S$0.05 each to GIL in consideration and full
satisfaction of the outstanding amount of S$42,475,239.55 owed by the Company to GIL;
and
(c)
the consolidation of 3 ordinary shares of S$0.05 each into 1 ordinary share of par value
S$0.15 each in the issued share capital of the Company.
101
C.
THE PROFORMA GROUP
At the date of this report, the Company has the following subsidiaries and associated companies
(referred to collectively as the ``Proforma Group''):±
Name of company
Place and date
of incorporation
Issued and
paid-up capital
Effective
equity
interest
held by the
Proforma
Group
%
Principal activities
Subsidiaries
Digiland
Distribution (M)
Sdn. Bhd.
Malaysia
2 June 1990
RM5,228,000
100
Trading of computers
and related accessories
and provision of
computer-related
services
Digiland Pty Ltd
Australia
20 December 1993
A$20,000,000
100
Wholesale distribution of
computer hardware
87.9*
Manufacturing and sale
of computers, computer
peripherals and
accessories
MSI Digiland
(Phils.), Inc.
The Philippines
26 March 1998
Peso 309,761,938
Digiland Vietnam
Pte Ltd
Singapore
29 August 1994
S$2
100
Trading of computers,
computer peripherals and
accessories
Digiland Indonesia
Pte Ltd
Singapore
20 January 1995
S$2,000,000
51
accessories
Shanghai ECCDigiland
International
Trading Co., Ltd.
People's Republic
of China
3 January 2000
Rmb41,393,629
52.5
Infonet Systems
and Services Pte
Ltd
Singapore
30 June 1983
S$2,000,000
100
Trading and providing
technical and
consultancy services in
high technology products
Digiland (Thailand)
Co., Ltd.
Thailand
13 October 1993
Baht122,000,000
100
DigilandMall.com
Pte Ltd
Singapore
4 February 2000
S$2
100
Internet retailing of
computers and related
accessories
Aspiren Pte Ltd
Singapore
25 February 2000
S$2
100
Provision of e-business
solutions
US$1,741,936
65.9
Trading of computer and
computer components
RM167,000
94
Trans Europe
Computer
Limited
Hong Kong
13 July 1995
Held by Digiland
Distribution (M)
Sdn. Bhd.
Computerlink Sdn.
Bhd.
Malaysia
21 February 1984
Inactive
* On 19 May 2001, the Company increased its shareholdings in MSI Digiland (Phils.), Inc from 51% to 87.9% via the
capitalisation of amount owing by MSI Digiland (Phils.), Inc to the Company, pending regulatory approval.
102
C.
THE PROFORMA GROUP (cont'd)
Name of company
Place and date
of incorporation
Issued and
paid-up capital
Effective
equity
interest
held by the
Proforma
Group
%
Principal activities
Held by Digiland
(Thailand) Co.,
Ltd.
Custom Print Co.,
Ltd.
Thailand
10 July 1996
Baht5,000,000
100
Malaysia
11 April 1990
RM 20,000
30
S$4,600,000
30
Provision of
entertainment and
recreational services
Associated
companies
Khidmat Komputer
Perdana Sdn.
Bhd.
e-station Pte Ltd
Singapore
19 October 1999
Except for the following, all the subsidiaries and an associated company in the Proforma Group
were audited by us or our associated ®rms for the ®nancial years under review in this report:
-------------------------------------------------------- Financial year ended 30 June -------------------------------------------------------Subsidiaries
1999
2000
2001
Trans Europe
Computer Limited
Raymond W.K. So &
Company, a Certi®ed
Public Accountants
(``CPA'') ®rm in
Hong Kong
Arthur Andersen Hong
Kong
Raymond W.K. So &
Company, a Certi®ed
Public Accountants ®rm
in Hong Kong
MSI Digiland (Phils.),
Inc.
Guzman, Bocaling &
Co., a CPA ®rm in the
Philippines
Guzman, Bocaling &
Philippines
Guzman, Bocaling &
Philippines
Custom Print Co.,
Ltd.
Accountants and
Management
Consultants Co., Ltd, a
CPA ®rm in Thailand
Accountants and
Management
Accountants and
Management
Not incorporated
KPMG Singapore, a
CPA ®rm in Singapore
KPMG Singapore, a
CPA ®rm in Singapore
Associated company
e-station Pte Ltd
The auditors' reports on the ®nancial statements of the subsidiaries or associated companies for
the ®nancial years under review were not subject to any quali®cation.
103
D.
BASIS OF PRESENTATION OF PROFORMA FINANCIAL INFORMATION
The proforma ®nancial information set out in this report is expressed in Singapore dollars and
shows the Proforma Consolidated Balance Sheets as at 30 June 1999, 2000 and 2001, the
Proforma Statement of Net Assets of the Company as at 30 June 2001, the Proforma
Consolidated Statements of Pro®t and Loss, Changes in Shareholders' Equity and Cash Flows
for the ®nancial years ended 30 June 1999, 2000 and 2001.
The proforma ®nancial information has been prepared as if the group structure at the date of this
report outlined in Section C had been in existence throughout the periods covered by this report,
or since the dates of incorporation of the companies in the Proforma Group, whichever is later.
The objective of the proforma ®nancial information of the Proforma Group is to show what the
historical information might have been, had the Proforma Group as described above existed at
an earlier date. However, the proforma ®nancial information of the Proforma Group is not
necessarily indicative of the results of the operations or the related effects on the ®nancial
position that would have been attained if the Proforma Group had actually existed earlier.
The proforma ®nancial information is based on the audited ®nancial statements of each company
in the Proforma Group, after making such adjustments which we considered appropriate. Such
proforma ®nancial information is presented on the basis of the accounting policies set out in
Note J.1 of this report.
E.
PROFORMA CONSOLIDATED BALANCE SHEETS
-------------------------- As at 30 June -------------------------Note
1999
2000
2001
S$'000
S$'000
S$'000
Fixed assets
4
8,890
9,006
10,021
5
Ð
1,048
710
Other investments
6
215
Ð
Ð
7
2,587
2,451
2,599
Current assets
8
172,854
246,476
293,855
Current liabilities
17
(102,798)
(161,872)
(171,643)
70,056
84,604
122,212
(1,029)
(1,589)
(1,035)
80,719
95,520
134,507
78,352
88,376
126,917
2,367
7,144
7,590
80,719
95,520
134,507
Net current assets
23
24
Minority interests
104
F.
PROFORMA CONSOLIDATED STATEMENTS OF PROFIT AND LOSS
----------------------- Year ended 30 June ---------------------Note
1999
2000
2001
S$'000
S$'000
S$'000
940,877
1,091,998
1,107,256
Other income
1,308
1,953
305
5,506
15,923
14,042
(904,444)
(1,055,392)
(1,057,328)
(13,037)
(17,458)
(21,886)
(1,683)
(2,594)
(3,318)
(694)
(1,201)
(1,437)
(1,603)
(1,584)
(1,779)
(20,117)
(17,252)
(18,957)
Turnover
25
Purchases
Personnel expenses
26
Depreciation
Sales commission
Freight and delivery
27
6,113
14,393
16,898
28
(1,645)
(1,988)
(4,421)
4,468
12,405
12,477
Ð
(332)
(338)
4,468
12,073
12,139
(1,482)
(4,330)
(4,219)
2,986
7,743
7,920
152
(994)
852
3,138
6,749
8,772
0.65
1.39
1.70
Taxation
29
Minority interests
Pro®t attributable to members of the
Company
Earnings per share (cents)
Ð basic and diluted
G.
30
PROFORMA CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
----------------------- Year ended 30 June ----------------------
Balance brought forward
1999
2000
2001
S$'000
S$'000
S$'000
615
78,352
88,376
Proforma issue of shares for cash
32,000
Ð
Ð
Proforma issue of shares via capitalisation of amount
owing to Proforma GIL Group
42,475
Ð
Ð
Issue of new shares for cash
Ð
503
Ð
Issue of shares via capitalisation of amount owing to GIL
Ð
3,500
31,530
3,138
6,749
8,772
124
(728)
(1,761)
78,352
88,376
126,917
Pro®t attributable to members of the Company
Currency translation adjustment
Balance carried forward
105
H.
PROFORMA CONSOLIDATED STATEMENTS OF CASH FLOWS
----------------------- Year ended 30 June ---------------------1999
2000
2001
S$'000
S$'000
S$'000
Cash ¯ows from operating activities
4,468
12,073
12,139
136
136
151
1,683
2,594
3,318
(12)
663
7
Ð
40
34
3,425
647
2,138
Ð other debtors
Ð
108
216
Ð af®liated companies
Ð
3,452
Ð
Ð Proforma GIL Group
Ð
1,492
Ð
(441)
Ð
(350)
246
16
Ð
Ð
5
Ð
904
759
1,925
Stocks written off
93
5
1
Interest expenses
2,515
3,408
4,922
(175)
(409)
(940)
Share of losses of associated companies
Ð
332
338
Gain on disposal of short-term investment
Ð
(41)
Ð
Gain on disposal of other investments
Ð
(721)
Ð
12,842
24,559
23,899
Adjustments for:±
Amortisation of goodwill
Depreciation of ®xed assets
(Gain)/loss on disposal of ®xed assets
Fixed assets written off
Provision for doubtful debts
Ð trade
Write back of provision for doubtful debts
Ð trade
Bad debts written off
Ð trade
Provision for stock obsolescence
Interest income
Operating pro®t before working capital changes
106
H.
PROFORMA CONSOLIDATED STATEMENTS OF CASH FLOWS (cont'd)
----------------------- Year ended 30 June ---------------------1999
2000
2001
S$'000
S$'000
S$'000
(Increase) decrease in:±
Stocks
(7,332)
(16,650)
(15,946)
(31,081)
(36,744)
(17,395)
(2,271)
(4,124)
(8,104)
93
(169)
79
(142)
(19)
19
(3,797)
(8,512)
(3,320)
(360)
898
Ð
Trade creditors
3,328
14,678
(12,768)
Bills payable
1,220
4,104
(823)
(678)
636
3,615
Ð
2
(2)
11,264
26,416
40,388
11
Ð
Ð
(16,903)
5,075
9,642
(2,515)
(3,408)
(4,922)
(728)
(343)
(510)
(20,146)
1,324
4,210
Acquisition of subsidiaries, net of cash acquired (Note A)
(5,064)
Ð
Ð
Purchase of ®xed assets
(4,179)
(2,759)
(4,374)
Sales proceeds from disposal of ®xed assets
53
212
272
Payment for other investments
(86)
Ð
Ð
Investment in an associated company
Ð
(1,380)
Ð
Sale of short-term investment
Ð
1,731
Ð
Sale of other investments
Ð
936
Ð
(9,276)
(1,260)
(4,102)
Trade debtors
Due from an associated company (non-trade)
Due from directors of a subsidiary
Increase (decrease) in:±
Other creditors and payables
Due to directors
Other payables, non-current
Cash (used in) generated from operations
Interest paid
Income taxes paid
Net cash (used in) generated from operating activities
Cash ¯ows from investing activities
(Note B)
107
H.
PROFORMA CONSOLIDATED STATEMENTS OF CASH FLOWS (cont'd)
----------------------- Year ended 30 June ---------------------1999
2000
2001
S$'000
S$'000
S$'000
Cash ¯ows from ®nancing activities
Proceeds from short-term loans
116
14,301
6,656
Repayment of short-term loans
Ð
(116)
(1,173)
Proceeds from long-term loans
Ð
346
Ð
Repayment of long-term loans
Ð
(13)
(207)
Contribution from minority shareholders
Ð
4,303
Ð
(59)
(381)
(331)
175
409
940
Proceeds from issue of shares
32,000
503
Ð
32,232
19,352
5,885
3
(433)
(319)
Net increase in cash and cash equivalents
2,813
18,983
5,674
Cash and cash equivalents at beginning of year
2,471
5,284
24,267
Cash and cash equivalents at end of year
5,284
24,267
29,941
Repayment of hire purchase liabilities
Interest income received
Effects of exchange differences
(Note J.16)
Note A: Analysis of acquisition of subsidiaries
The attributable net assets of subsidiaries acquired in the ®nancial year ended 30 June 1999 are as follows:
S$'000
Fixed assets
3,727
Other investments
130
Current assets
77,866
Current liabilities
(67,442)
Net current assets
10,424
(7,190)
Goodwill on acquisition
2,723
Minority interests
(2,462)
Total purchase price
7,352
Less: Cash and bank balances acquired
(2,288)
Acquisition of subsidiaries, net of cash acquired
5,064
Note B: Purchase of ®xed assets
Acquired by means of hire purchase
Cash payments
108
1999
2000
2001
S$'000
S$'000
S$'000
38
990
358
4,179
2,759
4,374
4,217
3,749
4,732
I.
PROFORMA STATEMENT OF NET ASSETS OF THE COMPANY AS AT 30 JUNE 2001
Note
Fixed assets
4
Investment in subsidiaries
S$'000
1,773
45,263
Loan to subsidiaries (non-current)
12
2,069
Current assets
8
170,381
Current liabilities
17
(86,714)
Net current assets
83,667
23
(501)
24
132,271
J.
NOTES TO THE PROFORMA FINANCIAL INFORMATION
1.
Signi®cant Accounting Policies
The following signi®cant accounting policies have been consistently applied in the preparation of
the ®nancial information of the Company and the Proforma Group.
Basis of accounting
The ®nancial information, expressed in Singapore dollars, have been prepared in accordance
with the Statements of Accounting Standard in Singapore under the historical cost convention.
Income recognition
(i)
Income from sale of goods is recognised upon delivery of goods and acceptance of goods
by customers.
(ii)
Income from provision of e-business solutions/services is recognised on an individual
contract basis using the percentage-of-completion method, when the stage of contract
completion can be reliably determined, costs to date can be clearly identi®ed, and the
total contract revenue to be received and costs to complete can be reliably estimated.
The percentage of completion is measured by the proportion that costs incurred for work
performed to date bears to estimated total contract costs.
Where it is probable that a loss will arise from a contract, the excess of total estimated
costs over expected income is expensed off to the pro®t and loss account.
The Proforma Group began e-business solutions/services during the ®nancial year ended
30 June 2001.
Proforma Group turnover excludes intercompany transactions and turnover of associates.
(iii)
Rental income, interest income and management fees are recognised on an accrual basis.
109
J.
NOTES TO THE PROFORMA FINANCIAL INFORMATION (cont'd)
1.
Signi®cant Accounting Policies (cont'd)
Basis of consolidation
The proforma consolidated ®nancial information include the ®nancial information of the Company
and its subsidiaries made up to the end of each ®nancial year. The results of subsidiaries
acquired or disposed off during the year are included in or excluded from the proforma
consolidated ®nancial information from the dates of their acquisition or disposal, as applicable.
All signi®cant inter-company transactions and balances have been eliminated on consolidation.
The consolidated proforma ®nancial information have been prepared as if the group structure at
the date of this report outlined in Section C had been in existence throughout the periods
covered by this report, or since the dates of incorporation of the companies in the Proforma
Group, whichever is later.
The difference between the cost of acquisition and the fair value of net assets acquired
represents goodwill on consolidation. Goodwill on consolidation is amortised on a straight-line
basis over 20 years in the statement of pro®t and loss from the date of acquisition.
In the preparation of the proforma consolidated ®nancial information, the ®nancial information of
foreign subsidiaries maintained in their respective measurement currencies have been translated
into Singapore dollars as follows:±
(i)
assets and liabilities are translated at exchange rates approximating those ruling at balance
sheet date;
(ii)
issued share capital and reserves brought forward are translated at exchange rates
approximating those ruling at transaction dates; and
(iii)
all pro®t and loss items are translated at the average exchange rates for the year.
Exchange differences arising from the above translations are taken to translation reserves in the
proforma consolidated balance sheet.
Subsidiaries
Investments in subsidiaries are stated in the ®nancial information of the Company at cost.
Provision is made where there is a decline in value that is other than temporary.
Associated companies
An associated company is de®ned as a company, not being a subsidiary, in which the Company
has at least a 20% equity interest and in whose ®nancial and operating policy decisions the
Company exercises signi®cant in¯uence. Investment in associated companies are stated in the
®nancial information of the Company at cost. Provision is made for diminution in value that is
other than temporary.
The Proforma Group's share of the post-acquisition reserves and results of the associated
company is included in the consolidated ®nancial information using the equity method of
accounting and is based on the audited ®nancial information, and where the ®nancial year end
of the associated company is different, share of post-acquisition reserves is based on the
management accounts made up to the ®nancial year end of the Proforma Group.
Af®liated companies
An af®liated company is de®ned as a company in which the minority shareholder/director of a
subsidiary has an equity interest or which the minority shareholder/director exercises signi®cant
in¯uence or control.
110
J.
1.
Proforma GIL Group
Proforma GIL Group consists of GIL and its subsidiaries, Eltech Electronics Limited and its
subsidiaries but excluding the Proforma Group.
Fixed assets
Fixed assets are stated at cost less accumulated depreciation. Depreciation is provided on a
straight-line basis to write off the cost of the ®xed assets over their estimated useful lives as
follows:±
Years
Leasehold land and buildings
25±60
Leasehold improvements
2±5
Plant and equipment
2±5
Computer systems and software
2±5
Furniture, ®ttings and renovations
3±10
Motor vehicles
2±5
Of®ce equipment
2±5
Hire purchase
Where assets are ®nanced by hire purchase agreements that give rights approximating
ownership, the assets are capitalised as if they had been purchased outright at the values
equivalent to the present value of the total rental payable during the periods of the hire
purchase and the corresponding hire purchase commitments are included under liabilities. The
excess of hire purchase payments over the recorded hire purchase liabilities is treated as
®nance charges which are allocated over each hire purchase term to give a constant rate of
interest on the outstanding balance at the end of each year.
Deferred income
Income from maintenance contracts is recognised as income on a pro-rated basis over the
period of the contracts. Advance payments received from customers are recognised as
deferred income in the balance sheet.
Stocks
Trading stocks are stated at the lower of cost and net realisable value. Cost is determined on a
weighted average basis.
Work in progress includes materials, all direct expenditures and an attributable proportion of
overheads. Provision is made for deteriorated, damaged, obsolete and slow-moving stocks.
Investment in property held for short-term purposes is stated at the lower of cost or market
value.
Taxation
Income tax expense is determined on the basis of tax effect accounting, using the liability
method and is applied to all signi®cant timing differences. Deferred tax bene®ts are not
recognised unless there is reasonable expectation of their realisation.
111
J.
1.
Foreign currency transactions and balances
The accounting records of the companies in the Proforma Group are maintained in their
respective measurement currencies.
Transactions in foreign currencies during the ®nancial year are recorded in the respective
measurement currencies using exchange rates approximating those prevailing on transaction
dates. Foreign currency monetary assets and liabilities at the balance sheet date are translated
into the respective measurement currencies at exchange rates approximating those ruling at that
date. All resultant exchange differences are dealt with through the pro®t and loss account.
Forward foreign exchange contracts
Gains and losses on all forward foreign exchange contracts, except for hedges against ®rm
future commitments, are recognised currently. Gains and losses on forward exchange contracts
that hedge against ®rm future commitments are deferred in the balance sheet and included in
measuring the committed transaction. The discount or premium on a hedged forward foreign
exchange contract arising from the difference between the contracted forward exchange rate
and the spot exchange rate at inception date of the contract is recognised to the pro®t and
loss account over the life of the contract.
Segment reporting
A segment is a distinguishable component of the Proforma Group that is engaged either in
providing products or services (business segment), or in providing products or services within a
particular economic environment (geographical segment), which is subject to risks and rewards
that are different from those of other segments.
Segment information is presented in respect of the Proforma Group's business and geographical
segments. This primary format, business segments, is based on the Group's management and
internal reporting structure.
In presenting information on the basis of geographical segments, segment revenue is based on
the geographical location of customers. Segment assets and capital expenditure are based on
the geographical location.
Inter-segment pricing is determined on an arm's length basis.
Segment results, assets and liabilities include items directly attributable to a segment as well as
those that can be allocated on a reasonable basis. Unallocated items mainly comprise incomeearning assets, interest-bearing loans, borrowings and expenses, and corporate assets and
expenses.
Segment capital expenditure is the total cost incurred during the year to acquire segment assets
that are expected to be used for more than one year.
2.
Basis of Adjustments in preparing the Proforma Financial Information
In arriving at the proforma consolidated financial information, the principal adjustments which
were necessary in order to present the financial information on a consistent and comparable
basis, include:±
(a)
notional adjustments to reflect the investments and share capital of the Company, as if the
Proforma Group had existed from 1 July 1998;
(b)
issue of shares to GIL pursuant to cash injection and capitalisation of amount owing to GIL
prior to the demerger exercise;
(c)
cash proceeds from the issue of shares to GIL was used to repay debt owing to GIL;
112
J.
2.
Basis of Adjustments in preparing the Proforma Financial Information (cont'd)
3.
(d)
adjustments to reflect the income and costs relating to distribution activities previously
undertaken by GES (Singapore) Pte Ltd (``GES'') now taken over by the Proforma Group;
(e)
adjustments to reflect the allocation of depreciation charges on building and other fixed
assets of GES utilised by the Proforma Group; and
(f)
notional interest, at the prevailing inter-bank rate plus 1%, charged by GIL for funding
provided to the Proforma Group.
Statement of Adjustments
The following adjustments have been made to the audited ®nancial statements of the Proforma
Group for the periods covered in this report:±
---------------------------- Proforma Group ------------------------------------------------- Year ended 30 June ---------------------1999
2000
2001
S$'000
S$'000
S$'000
Turnover
From summation of audited ®nancial statements of
individual companies after elimination of inter-company
sales
938,116
1,087,368
1,105,256
Adjustment to re¯ect turnover relating to distribution
activities previously undertaken by GES now taken over
by the Proforma Group
2,761
4,630
2,000
Adjusted turnover per Proforma Consolidated Statements
of Pro®t and Loss
940,877
1,091,998
1,107,256
998
2,619
(2,450)
Add income, net of costs, relating to distribution activities
previously undertaken by GES now taken over by the
Proforma Group
5,546
11,918
16,548
Less allocation of depreciation/rental charges on building
and other ®xed assets of GES utilised by the Proforma
Group
(635)
(644)
(259)
Less notional interest, at prevailing inter-bank rate plus
1%, charged by GIL for funding provided to the
Proforma Group
(1,441)
(1,820)
(1,700)
Adjusted pro®t before taxation per Proforma Consolidated
Statements of Pro®t and Loss
4,468
12,073
12,139
Pro®t (loss) before taxation
From summation of audited ®nancial statements of
individual companies after elimination entries on
consolidation
113
J.
4.
Fixed assets
Proforma Group
Leasehold
land and
buildings
Leasehold
improvements
S$'000
S$'000
Plant and
equipment
Computer
systems
and
software
Furniture,
fittings and
renovations
Motor
vehicles
Office
equipment
Total
S$'000
S$'000
S$'000
S$'000
S$'000
S$'000
1999
Cost
As at 1 July 1998
Ð
Ð
Ð
2,442
Ð
Ð
Ð
2,442
160
333
410
172
2,572
869
2,075
6,591
Additions
Ð
77
557
2,208
447
404
524
4,217
Disposals
Ð
Ð
Ð
(12)
(29)
(219)
(1)
(261)
5
27
4
9
124
62
168
399
165
437
971
4,819
3,114
1,116
2,766
13,388
Ð
Ð
Ð
Ð
Ð
Ð
Ð
Ð
Arising from acquisition of subsidiaries
6
66
239
17
995
384
1,157
2,864
Charge for the year
2
100
83
504
413
202
379
1,683
Disposals
Ð
Ð
Ð
(3)
(14)
(184)
Ð
(201)
Translation differences
Ð
5
1
1
39
25
81
152
8
171
323
519
1,433
427
1,617
4,498
157
266
648
4,300
1,681
689
1,149
8,890
114
As at 30 June 1999
Accumulated depreciation
As at 1 July 1998
As at 30 June 1999
Net book value
As at 30 June 1999
J.
4.
Fixed assets (cont'd)
Proforma Group
Leasehold
land and
buildings
Leasehold
improvements
S$'000
S$'000
Plant and
equipment
Computer
systems
and
software
Furniture,
fittings and
renovations
Motor
vehicles
Office
equipment
Total
S$'000
S$'000
S$'000
S$'000
S$'000
S$'000
2000
Cost
As at 1 July 1999
165
437
971
4,819
3,114
1,116
2,766
13,388
Additions
Ð
34
578
1,395
591
611
540
3,749
Disposals
(167)
(2)
(3)
Ð
(708)
(270)
(137)
(1,287)
2
(41)
(9)
(2)
25
(38)
(194)
(257)
Ð
428
1,537
6,212
3,022
1,419
2,975
15,593
8
171
323
519
1,433
427
1,617
4,498
Charge for the year
Ð
89
353
1,093
425
203
431
2,594
Disposals
(9)
Ð
(3)
Ð
(213)
(111)
(37)
(373)
1
(16)
(3)
(1)
(17)
(11)
(85)
(132)
Ð
244
670
1,611
1,628
508
1,926
6,587
Ð
184
867
4,601
1,394
911
1,049
9,006
115
As at 30 June 2000
As at 1 July 1999
As at 30 June 2000
Net book value
As at 30 June 2000
J.
4.
Proforma Group
Leasehold
improvements
Plant and
equipment
Computer
systems
and
software
S$'000
S$'000
S$'000
Furniture,
fittings and
renovations
Motor
vehicles
Office
equipment
Total
S$'000
S$'000
S$'000
S$'000
2001
Cost
116
As at 1 July 2000
428
1,537
6,212
3,022
1,419
2,975
15,593
Additions
114
435
1,083
1,363
766
971
4,732
Disposals
Ð
(264)
(7)
(419)
(60)
(56)
(806)
(33)
(5)
20
(98)
(12)
(120)
(248)
As at 30 June 2001
509
1,703
7,308
3,868
2,113
3,770
19,271
244
670
1,611
1,628
508
1,926
6,587
Charge for the year
90
381
1,455
572
245
575
3,318
Disposals
Ð
(110)
(1)
(307)
(34)
(41)
(493)
(22)
(4)
9
(31)
1
(115)
(162)
As at 30 June 2001
312
937
3,074
1,862
720
2,345
9,250
197
766
4,234
2,006
1,393
1,425
10,021
As at 1 July 2000
Net book value
As at 30 June 2001
J.
4.
Proforma Company
Plant and
equipment
Computer
systems
and
software
Furniture,
fittings and
renovations
Motor
vehicles
Office
equipment
Total
S$'000
S$'000
S$'000
S$'000
S$'000
S$'000
2001
Cost
117
As at 1 July 2000
23
5,355
194
411
262
6,245
Additions
33
547
204
394
59
1,237
Transferred out
Ð
(5,119)
Ð
Ð
(227)
(5,346)
As at 30 June 2001
56
783
398
805
94
2,136
1
1,460
9
125
62
1,657
Charge for the year
10
88
66
34
15
213
Transferred out
Ð
(1,448)
Ð
Ð
(59)
(1,507)
As at 30 June 2001
11
100
75
159
18
363
45
683
323
646
76
1,773
As at 1 July 2000
Net book value
As at 30 June 2001
As at 30 June 1999, 2000 and 2001, the Proforma Group had motor vehicles under hire purchase with net book values of approximately ($'000) S$103,
S$352 and S$771 respectively and plant and equipment under hire purchase with net book values of approximately ($'000) S$164, S$456 and S$212
respectively.
J.
5.
---------------------------- Proforma Group --------------------------------------------------------- As at 30 June -----------------------------1999
2000
2001
S$'000
S$'000
S$'000
Unquoted equity shares, at cost
Ð
1,380
1,380
Share of post-acquisition losses
Ð
(332)
(670)
Ð
1,048
710
Movements in share of post-acquisition losses during the ®nancial years are as follows:±
At beginning of year
Ð
Ð
332
Share of post-acquisition losses for the year
Ð
332
338
At end of year
Ð
332
670
Details of the associated companies held by the Proforma Group are set out in Note 32 to the
proforma ®nancial information.
6.
Other investments
---------------------------- Proforma Group --------------------------------------------------------- As at 30 June -----------------------------1999
2000
2001
S$'000
S$'000
S$'000
Quoted equity shares, at cost
Unquoted equity shares, at cost
7.
82
Ð
Ð
133
Ð
Ð
215
Ð
Ð
---------------------------- Proforma Group --------------------------------------------------------- As at 30 June ------------------------------
Less accumulated amortisation
1999
2000
2001
S$'000
S$'000
S$'000
2,723
2,723
3,022
(136)
(272)
(423)
2,587
2,451
2,599
Movements in accumulated amortisation during the ®nancial years are as follows:±
Ð
136
272
Amortisation for the year
136
136
151
At end of year
136
272
423
118
J.
8.
Current assets
Note
--------------------- Proforma Group --------------------
Proforma Company
------------------------ As at 30 June ------------------------
As at 30 June
1999
2000
2001
2001
S$'000
S$'000
S$'000
S$'000
Stocks
9
56,937
72,860
86,902
44,052
Trade debtors
10
84,786
120,893
136,442
46,524
Other debtors, deposits and
prepayments
11
6,526
10,542
18,123
6,148
Due from associated
companies (trade)
13
142
311
220
Ð
Due from an associated
company (non-trade)
12
Ð
19
Ð
Ð
Ð
Ð
Ð
23,211
Due from subsidiaries (trade)
9.
Due from subsidiaries (nontrade)
12
Ð
Ð
Ð
12,218
Loan to subsidiaries
12
Ð
Ð
Ð
24,954
Due from af®liated companies
(trade)
14
12,549
16,773
20,093
5,298
Due from directors of a
subsidiary
12
898
Ð
Ð
Ð
15
1,690
Ð
Ð
Ð
Fixed deposits
16
1,403
12,307
13,417
Ð
16
7,923
12,771
18,658
7,976
172,854
246,476
293,855
170,381
Stocks
--------------------- Proforma Group --------------------
Proforma Company
------------------------ As at 30 June ------------------------
As at 30 June
1999
2000
2001
2001
S$'000
S$'000
S$'000
S$'000
Trading stocks at cost
57,201
72,806
85,800
44,018
Less provision for stock obsolescence
(1,004)
(1,215)
(2,670)
(487)
56,197
71,591
83,130
43,531
Ð
556
700
Ð
740
713
3,072
521
56,937
72,860
86,902
44,052
Work in progress
Goods-in-transit
119
J.
9.
Stocks (cont'd)
Movements in provision for stock obsolescence during the ®nancial years are as follows:±
--------------------- Proforma Group --------------------
Proforma Company
------------------------ As at 30 June ------------------------
As at 30 June
1999
2000
2001
2001
S$'000
S$'000
S$'000
S$'000
Ð
1,004
1,215
Ð
579
Ð
Ð
Ð
Provision for the year
904
759
1,925
530
Written off against provision
(502)
(510)
(450)
(43)
23
(38)
(20)
Ð
1,004
1,215
2,670
487
At end of year
10.
Trade debtors
--------------------- Proforma Group --------------------
Proforma Company
------------------------ As at 30 June ------------------------
As at 30 June
1999
2000
2001
2001
S$'000
S$'000
S$'000
S$'000
Trade debtors
88,386
124,851
140,061
47,717
Less provision for doubtful debts
(3,600)
(3,958)
(3,619)
(1,193)
84,786
120,893
136,442
46,524
Movements in provision for doubtful debts during the ®nancial years are as follows:±
929
3,600
3,958
2,553
931
Ð
Ð
Ð
3,425
647
2,138
1,050
(1,258)
(264)
(2,185)
(2,073)
Write back of provision
(441)
Ð
(350)
(337)
14
(25)
58
Ð
3,600
3,958
3,619
1,193
At end of year
120
J.
11.
--------------------- Proforma Group --------------------
Proforma Company
------------------------ As at 30 June ------------------------
As at 30 June
Other debtors
1999
2000
2001
2001
S$'000
S$'000
S$'000
S$'000
5,259
6,454
6,941
1,634
(1)
(108)
(224)
Ð
5,258
6,346
6,717
1,634
Deposits
482
855
6,058
52
Prepayments
778
3,341
5,258
4,462
8
Ð
90
Ð
6,526
10,542
18,123
6,148
Advances to employees
Ð
1
108
Ð
11
Ð
Ð
Ð
Ð
108
216
Ð
(11)
(1)
(109)
Ð
1
Ð
9
Ð
At end of year
1
108
224
Ð
Included in other debtors of the Proforma Group is an interest-free loan of approximately ($'000)
S$894, S$899 and nil (RM 1,966, RM1,972, and nil ) for the ®nancial years ended 30 June 1999,
2000 and 2001 respectively to Digiland (M) Sdn. Bhd., a company with common directors of a
subsidiary.
12.
Due from an associated company/subsidiaries/directors of a subsidiary (non-trade)
Loan to subsidiaries
Due to subsidiaries (non-trade)
These amounts are unsecured, interest-free and repayable within twelve months.
13.
--------------------- Proforma Group --------------------
Proforma Company
------------------------ As at 30 June ------------------------
As at 30 June
1999
2000
2001
2001
S$'000
S$'000
S$'000
S$'000
Due from associated companies
410
579
500
Ð
(268)
(268)
(280)
Ð
142
311
220
Ð
121
J.
13.
Due from associated companies (trade) (cont'd)
--------------------- Proforma Group --------------------
Proforma Company
------------------------ As at 30 June ------------------------
As at 30 June
1999
2000
2001
2001
S$'000
S$'000
S$'000
S$'000
Ð
268
268
Ð
253
Ð
Ð
Ð
15
Ð
12
Ð
268
268
280
Ð
At end of year
14.
Due from af®liated companies
--------------------- Proforma Group --------------------
Proforma Company
------------------------ As at 30 June ------------------------
As at 30 June
1999
2000
2001
2001
S$'000
S$'000
S$'000
S$'000
12,549
20,225
23,714
5,298
Ð
(3,452)
(3,621)
Ð
12,549
16,773
20,093
5,298
15.
Ð
Ð
3,452
Ð
Ð
3,452
Ð
Ð
Ð
Ð
169
Ð
At end of year
Ð
3,452
3,621
Ð
This comprises a freehold property held for resale. It is stated at cost which approximates the
market value as at 30 June 1999. This property was sold off in the ®nancial year ended 30 June
2000.
16.
Cash and cash equivalents
Note
--------------------- Proforma Group --------------------
Proforma Company
------------------------ As at 30 June ------------------------
As at 30 June
1999
2000
2001
2001
S$'000
S$'000
S$'000
S$'000
7,923
12,771
18,658
7,976
Fixed deposits
1,403
12,307
13,417
Ð
(4,042)
(811)
(2,134)
(1,246)
5,284
24,267
29,941
6,730
Bank overdrafts
17
122
J.
17.
Current liabilities
Note
--------------------- Proforma Group --------------------
Proforma Company
------------------------ As at 30 June ------------------------
As at 30 June
1999
2000
2001
2001
S$'000
S$'000
S$'000
S$'000
Trade creditors
18
39,818
54,496
41,728
9,224
Bills payable
19
11,841
15,945
15,122
13,548
39,385
63,799
72,658
39,493
Balances due to Proforma GIL
Group
20
5,913
6,549
10,164
2,196
Due to subsidiaries (non-trade)
12
Ð
Ð
Ð
12,447
Ð
2
Ð
Ð
1,536
5,366
9,487
8,462
Due to directors
Provision for taxation
Long-term bank loans (current)
19
Ð
245
119
Ð
Hire purchase liabilities (current
portion)
21
147
358
447
98
22
116
14,301
19,784
Ð
4,042
811
2,134
1,246
102,798
161,872
171,643
86,714
Bank overdrafts
18.
16, 19
Trade creditors
Included in trade creditors as at 30 June 1999 and 2000 are approximately S$9.8 million and
S$4.2 million respectively, secured by way of a registered mortgage debenture over the assets
of a subsidiary.
19.
Bills payable/Bank overdrafts/Long-term bank loans
Banking facilities granted to the Company are secured by the following:±
(a)
®rst ®xed and ¯oating charge on the assets of the Company, and
(b)
corporate guarantees from the Proforma GIL Group.
In addition, the Proforma Group's banking facilities are secured by the following:±
(a)
pledge of ®xed deposits of a subsidiary amounting to approximately ($'000) Bht153 and
Bht129 as at 30 June 2000 and 2001 respectively;
(b)
pledge of ®xed deposits of a subsidiary amounting to ($'000) RM1,500 and RM1,000 as at
30 June 2000 and 2001 respectively;
(c)
corporate guarantee by the Company for a subsidiary; and
(d)
registered charge over the ®xed deposits of a subsidiary.
123
J.
19.
Bills payable/Bank overdrafts/Long-term bank loans (cont'd)
Details of long-term bank loans are as follows:±
--------------------- Proforma Group --------------------
Proforma Company
------------------------ As at 30 June ------------------------
As at 30 June
1999
2000
2001
2001
S$'000
S$'000
S$'000
S$'000
Term loan A
Ð
333
92
Ð
Term loan B
Ð
Ð
33
Ð
Ð
333
125
Ð
Due within 12 months
Ð
245
119
Ð
Due after 12 months
Ð
88
6
Ð
Term loan A is secured by the personal guarantee of a director of a subsidiary and is repayable
by monthly installments, the last of which will fall due in October 2001 and bears interest at bank
prime rate plus 2% per annum.
Term loan B is secured by motor vehicles of a subsidiary with net book values of approximately
S$74,000 and is repayable over 2 years and bears interests ranging from 16.99% to 17.96%.
20.
Other creditors
Proforma Company
------------------------ As at 30 June ------------------------
As at 30 June
1999
2000
2001
2001
S$'000
S$'000
S$'000
S$'000
2,487
1,721
5,082
1,848
Accrued purchases
837
599
42
Ð
Reimbursable expenses
206
17
4
Ð
Deferred income
467
879
1,443
Ð
1,916
3,333
3,593
348
5,913
6,549
10,164
2,196
Accrued operating expenses
21.
--------------------- Proforma Group --------------------
Hire purchase liabilities
----------------------------- Proforma Group ---------------------------Payments
Interest
Principal
$'000
$'000
$'000
1999
1 year to 5 years
186
23
163
Not later than 1 year
161
14
147
347
37
310
124
J.
21.
Hire purchase liabilities (cont'd)
----------------------------- Proforma Group ---------------------------Payments
Interest
Principal
$'000
$'000
$'000
2000
1 year to 5 years
641
80
561
398
40
358
1,039
120
919
2
Ð
2
1 year to 5 years
599
100
499
509
62
447
1,110
162
948
2001
Later than 5 years
------------------------- Proforma Company -----------------------Payments
Interest
Principal
$'000
$'000
$'000
2001
22.
1 year to 5 years
249
44
205
107
9
98
356
53
303
---------------------------- Proforma Group --------------------------------------------------------- As at 30 June ------------------------------
Secured
Unsecured
1999
2000
2001
S$'000
S$'000
S$'000
Ð
13,525
19,784
116
776
Ð
116
14,301
19,784
Details of secured term loans are as follows:±
The short-term bank loans of the subsidiaries are secured by the following:±
(a)
corporate guarantees by the Company; and
(b)
a pledge of ®xed deposits of a subsidiary amounting to ($'000) US$6,000 and US$6,316 as
at 30 June 2000 and 2001 respectively.
The secured bank loans of subsidiaries bear interest ranging from 6.1% to 6.4% per annum for
the ®nancial year ended 30 June 2000 and from 5.6% to 15.25% per annum for the ®nancial year
ended 30 June 2001.
125
J.
22.
Short-term bank loans (cont'd)
Details of unsecured term loans are as follows:±
The unsecured bank loans of a subsidiary as at 30 June 2000 are repayable in 360 days and
bear interest ranging from 12.5% to 13.0% per annum (1999:nil).
23.
Note
Deferred taxation
--------------------- Proforma Group --------------------
Proforma Company
------------------------ As at 30 June ------------------------
As at 30 June
1999
2000
2001
2001
S$'000
S$'000
S$'000
S$'000
782
940
528
296
Long-term bank loans (noncurrent)
19
Ð
88
6
Ð
Hire purchase liabilities (noncurrent portion)
21
163
561
501
205
84
Ð
Ð
Ð
1,029
1,589
1,035
501
Other payables (non-current)
24.
Note
--------------------- Proforma Group --------------------
Proforma Company
------------------------ As at 30 June ------------------------
As at 30 June
1999
2000
2001
2001
S$'000
S$'000
S$'000
S$'000
Share capital
(a)
70,475
75,945
107,475
107,475
Share premium
(b)
5,000
5,033
5,033
5,033
2,753
8,002
16,774
19,763
124
(604)
(2,365)
Ð
78,352
88,376
126,917
132,271
Revenue reserves
Translation reserves
126
J.
(a)
Share Capital
Proforma Company
------------------------ As at 30 June ------------------------
As at 30 June
1999
2000
2001
2001
S$'000
S$'000
S$'000
S$'000
1,000
70,475
75,945
75,945
Proforma issue of 27,000,000
ordinary shares of S$1 each at
S$1.185 per share for cash
27,000
Ð
Ð
Ð
ordinary shares of S$1 each at par
via capitalisation of amount owing
to GIL
42,475
Ð
Ð
Ð
Bonus issue of 1,500,000 ordinary
shares of S$1 each at par via
capitalisation of revenue reserves
Ð
1,500
Ð
Ð
Issue of 3,500,000 ordinary shares
of S$1 each at par via
capitalisation of amount owing to
GIL
Ð
3,500
Ð
Ð
Issue of 470,000 ordinary shares of
S$1 each at S$1.07 per share for
cash
Ð
470
Ð
Ð
Issue of 31,530,000 ordinary shares
of S$1 each at par via
capitalisation of amount owing to
GIL
Ð
Ð
31,530
31,530
70,475
75,945
107,475
107,475
At end of year
(b)
--------------------- Proforma Group --------------------
Share premium
--------------------- Proforma Group --------------------
Proforma Company
------------------------ As at 30 June ------------------------
As at 30 June
1999
2000
2001
2001
S$'000
S$'000
S$'000
S$'000
ordinary shares of S$1 each at
S$1.185 per share for cash
Ð
5,000
5,033
5,033
5,000
Ð
Ð
Ð
Ð
33
Ð
Ð
5,000
5,033
5,033
5,033
Issue of 470,000 ordinary shares of
S$1 each at S$1.07 for cash
At end of year
25.
Turnover
Turnover represents invoiced trading sales and service income, net of discounts and returns.
Intercompany sales within the Proforma Group are eliminated.
127
J.
26.
Personnel expenses
---------------------------- Proforma Group ------------------------------------------------- Year ended 30 June ----------------------
Wages, salaries and bonuses *
1999
2000
2001
S$'000
S$'000
S$'000
11,335
15,337
18,068
Pension contribution
894
944
1,769
Termination bene®ts
Ð
Ð
320
808
1,177
1,729
13,037
17,458
21,886
Other social expenses
* Included are remuneration of directors of the Company of approximately ($'000) S$138, S$241 and S$309 for the year
ended 30 June 1999, 2000 and 2001 respectively and remuneration of directors of the subsidiaries of approximately
($'000) S$262, S$559 and S$56 for the year ended 30 June 1999, 2000 and 2001 respectively.
27.
This is determined after charging (crediting) the following:±
---------------------------- Proforma Group ------------------------------------------------- Year ended 30 June ----------------------
Amortisation of goodwill on consolidation
1999
2000
2001
S$'000
S$'000
S$'000
136
136
151
1,683
2,594
3,318
Ð Directors of the Company
138
241
309
Ð Directors of the subsidiaries
262
559
56
Ð
40
34
(12)
663
7
Ð trade debtors
3,425
647
2,138
Ð other debtors
Ð
108
216
Ð af®liated companies (trade)
Ð
3,452
Ð
Ð
1,492
Ð
(441)
Ð
(350)
Ð
(9)
Ð
246
16
Ð
Ð
5
Ð
904
759
1,925
Stocks written off
93
5
1
Gain on disposal of short-term investment
Ð
(41)
Ð
Gain on disposal of other investments
Ð
(721)
Ð
Write off of other investments
Ð
75
Ð
1,105
1,074
1,743
Depreciation
Directors' remuneration
Fixed assets written off
(Gain)/loss on disposal of ®xed assets
Provision for doubtful debts
Write back of provision for doubtful debts
Ð trade debtors
Bad trade debts recovered
Bad debts written off
Ð trade debtors
Provision for stock obsolescence
Operating lease expenses
128
J.
28.
2000
2001
S$'000
S$'000
S$'000
Interest expenses
Ð bank overdraft
(231)
(67)
(115)
Ð hire purchase
(6)
(27)
(35)
Ð term loans
Ð
(552)
(1,096)
Ð bills payable
(6)
(61)
(187)
(499)
(536)
(934)
(1,516)
(2,077)
(2,504)
(257)
(88)
(51)
Ð
Ð
(439)
(2,515)
(3,408)
(5,361)
Ð ®xed deposits
134
86
748
Ð ACU deposits
Ð
220
Ð
Ð bank balances
41
103
177
Ð others
Ð
Ð
15
695
1,011
Ð
(1,645)
(1,988)
(4,421)
Ð trust receipts
Ð others
Foreign exchange loss, net
Add:
Interest income
Foreign exchange gain, net
29.
Taxation
2000
2001
S$'000
S$'000
S$'000
Current tax
Ð current year
1,175
3,818
5,253
20
Ð
(578)
Ð current year
687
275
156
Ð (over) under provision in respect of prior year
(400)
237
(612)
1,482
4,330
4,219
Ð under (over) provision in respect of prior year
Deferred tax
129
J.
29.
Taxation (cont'd)
As at 30 June 2001, the Proforma Group has unutilised tax losses and unabsorbed capital
allowances of approximately ($'000) S$6,471 (2000: S$4,522, 1999: S$2,994) and S$3,137
(2000: S$306, 1999: S$170) respectively available for offset against future taxable pro®ts,
subject to agreement with the Income Tax Authorities and compliance with the relevant
provisions of the tax legislation of the respective countries in which the companies operate.
The potential deferred tax asset arising from these unutilised tax losses and unabsorbed capital
allowances has not been recognised in the proforma ®nancial information in accordance with the
accounting policy stated in Note 1 to the proforma ®nancial information.
The taxation charge of the Proforma Group is higher than that arrived at by applying the
respective statutory tax rates to the pro®ts of the individual companies in the Proforma Group
principally because losses arising in subsidiaries cannot be set off against pro®ts of other
subsidiaries and expenses not deductible for tax purposes.
30.
Earnings per share (cents)
The calculations of earnings per share are based on the pro®ts and numbers of shares shown
below:±
Pro®t attributable to Members of the Company (S$)
Weighted average number of shares in issue during the
year
31.
1999
2000
2001
'000
'000
'000
3,138
6,749
8,772
479,835
486,578
514,940
Subsidiaries in the Proforma Group
Details of the subsidiaries are as follows:±
Name of company
Principal Activities
Country of
Incorporation
and Place
of Business
Interest held by the
Proforma Group
------------- As at 30 June ------------1999
2000
2001
%
%
%
Held by the Company
Infonet Systems and
Services Pte Ltd
Trading and providing
technical and consultancy
services in high
technology products
Singapore
100
100
100
Sdn. Bhd.
Trading of computers and
related accessories and
provision of computerrelated services
Malaysia
100
100
100
Digiland (Thailand) Co.,
Ltd.
related accessories
Thailand
100
100
100
Digiland Vietnam Pte Ltd
accessories
Singapore
100
100
100
Digiland Indonesia Pte Ltd
accessories
Singapore
51
51
51
130
J.
31.
Subsidiaries in the Proforma Group (cont'd)
Name of company
Country of
Incorporation
and Place
of Business
Proforma Group
------------- As at 30 June ------------1999
2000
2001
%
%
%
MSI Digiland (Phils.), Inc.
Manufacturing and sale of
computers, computer
peripherals and
accessories
The Philippines
87.9
87.9
87.9
Digiland Pty Ltd
Wholesaling of computer
hardware
Australia
100
100
100
Trans Europe Computer
Limited
Trading of computer
components
Hong Kong
65.9
65.9
65.9
DigilandMall.com Pte Ltd
Internet-retailing of
computers and related
accessories
Singapore
Ð
100
100
Aspiren Pte Ltd
Provision of e-business
solutions
Singapore
Ð
100
100
International Trading
Co., Ltd.
related accessories
People's
Republic of
China
Ð
52.5
52.5
Held by subsidiaries
32.
Computerlink Sdn. Bhd.
Inactive
Malaysia
94
94
94
Custom Print Co., Ltd.
related accessories
Thailand
100
100
100
Associated companies in the Proforma Group
Name of company
Country of
Incorporation
and Place
of Business
Proforma Group
------------- As at 30 June ------------1999
2000
2001
%
%
%
Held by subsidiaries
Khidmat Komputer
Perdana Sdn. Bhd.
related accessories
Malaysia
30
30
30
e-station Pte Ltd
Provision of entertainment
and recreational services
Singapore
Ð
30
30
131
J.
33.
Related party information
In addition to the related party information shown elsewhere in the proforma consolidated
®nancial information, the following signi®cant transactions between the Proforma Group and
related parties took place during the ®nancial years on terms agreed between the parties
concerned:
2000
2001
S$'000
S$'000
S$'000
Income
Sales to Proforma GIL Group
10,116
82,937
14,423
Sales to af®liated companies
22,109
36,534
38,363
282
2,423
240
2,612
4,530
2,000
150
100
Ð
217,009
198,838
65,665
318
577
259
1,516
2,077
2,504
42
45
Ð
Sales to an associated company
Service income from Proforma GIL Group
Income from e-commerce services from Proforma GIL
Group
Expense
Purchases from Proforma GIL Group
Rental expense to Proforma GIL Group
Interest on loan from Proforma GIL Group
Other
Purchase of ®xed assets from Proforma GIL Group
34.
Commitments and contingent liabilities
(a)
Lease commitments
The Proforma Group has aggregate minimum lease commitments in respect of its usage of
factory, warehouse and of®ce premises. Lease terms do not contain restrictions on the
Proforma Group's activities concerning dividends, additional debt or further leasing.
2000
2001
S$'000
S$'000
S$'000
Future minimum lease payments
(b)
Ð Not later than one year
949
873
1,261
Ð 1 year through 5 years
1,644
550
1,696
2,593
1,423
2,957
Contingent liabilities
(i)
As at 30 June 2001, the Company issued a corporate guarantee of approximately
S$114 million (2000: S$101 million, 1999: S$81 million) for loan facilities granted to a
company in the Proforma GIL Group.
132
J.
34.
Commitments and contingent liabilities (cont'd)
(b)
35.
Contingent liabilities (cont'd)
(ii)
Php35.7 million (2000: nil, 1999: nil) and Bht100 million (2000: nil, 1999: nil) for
banking facilities granted to subsidiaries of the Company.
(iii)
S$14.6 million (2000: nil, 1999: nil) to suppliers of subsidiaries for purchase of
goods. The Company also issued a corporate guarantee to another supplier of a
subsidiary to guarantee all expenses incurred by a subsidiary.
(iv)
As at 30 June 2001, a subsidiary of the Company issued guarantees amounting to
Bht684,000 (2000: Bht610,000, 1999: Bht260,000) for the purpose of bidding for
tenders, and a guarantee of 284,126 (2000: Bht2.5 million, 1999: nil) for the purchase
of goods.
(v)
As at 30 June 2001, another subsidiary of the Company has outstanding banker's
guarantees of approximately ($'000) S$622 (2000: S$1,059, 1999: S$123) issued in
favour of third parties in the normal course of business. These guarantees are
secured by way of a registered charge over the ®xed deposits of the subsidiary.
(vi)
As at 30 June 2001, the Company has undertaken to provide continuing ®nancial
support to two of its subsidiaries to enable them to operate as going concerns and
to meet their obligations for at least 12 months from the respective dates of the
director's reports of the subsidiaries.
Forward foreign exchange contracts commitments
As at 30 June 2001, the Proforma Group had outstanding forward foreign exchange contracts to
buy approximately ($'000) US$4,750 (2000: US$1,970) and sell A$9,247 (2000: Bht76,934).
There were no outstanding forward foreign exchange contracts for the year ended 30 June 1999.
36.
Segment information
(a)
Business segments
The Group is organised on a worldwide basis into two main operating divisions, namely:±
Ð Distribution
Ð E-Services.
Inter segment pricing is on an arm's length basis.
Distribution
E-Services
Eliminations
Group
S$'000
S$'000
S$'000
S$'000
1999
Revenue
External sales
Inter-segment sales
927,186
13,691
Ð
940,877
415
Ð
(415)
Ð
927,601
13,691
(415)
940,877
6,078
35
Ð
6,113
(1,645)
Taxation
(1,482)
Minority interests
152
Net pro®t
3,138
133
J.
36.
Segment information (cont'd)
(a)
Business segments (cont'd)
Distribution
E-Services
Eliminations
Group
S$'000
S$'000
S$'000
S$'000
Assets
Allocated assets
174,691
7,053
Ð
Other investments
181,744
215
2,587
Total assets
184,546
Liabilities
Allocated liabilities
59,881
4,561
Ð
64,442
39,385
Total liabilities
103,827
Capital expenditure
3,461
756
Ð
4,217
Depreciation on ®xed assets
1,529
154
Ð
1,683
Amortisation of goodwill on
consolidation
136
Other non-cash expenses
4, 122
105
Ð
4,227
1,063,292
28,706
Ð
1,091,998
2,413
Ð
(2,413)
Ð
1,065,705
28,706
(2.413)
1,091,998
12,701
1,692
Ð
14,393
2000
Revenue
External sales
Inter-segment sales
(1,988)
companies
(332)
Taxation
(4,330)
Minority interests
(994)
Net pro®t
6,749
Assets
Allocated assets
243,447
12,035
Ð
255,482
Investments in associated companies
1,048
2,451
Total assets
258,981
134
J.
36.
(a)
Business segments (cont'd)
Distribution
E-Services
Eliminations
Group
S$'000
S$'000
S$'000
S$'000
2000
Liabilities
92,225
7,437
Ð
99,662
63,799
Total liabilities
163,461
Capital expenditure
2,438
1,311
Ð
3,749
2,099
495
Ð
2,594
consolidation
136
6,337
187
Ð
6,524
1,080,287
26,969
Ð
1,107,256
1,369
2,814
(4,183)
Ð
1,081,656
29,783
(4,183)
1,107,256
16,124
774
Ð
16,898
2001
Revenue
External sales
Inter-segment sales
(4,421)
companies
(338)
Taxation
(4,219)
Minority interests
852
Net pro®t
8,772
Assets
Allocated assets
289,714
14,162
Ð
303,876
710
2,599
Total assets
307,185
Liabilities
95,209
4,811
Ð
100,020
72,658
Total liabilities
172,678
Capital expenditure
4,006
726
Ð
4,732
1,550
1,768
Ð
3,318
consolidation
151
3,429
135
535
Ð
3,964
J.
36.
(b)
Geographical segments
Turnover is based on the location of customers regardless of where the goods are
produced. Assets and additions to ®xed assets are based on the location of those assets.
-------------------------------------- Turnover ------------------------------------1999
2000
2001
S$'000
S$'000
S$'000
Singapore
Others
191,730
749,147
256,920
835,078
274,112
833,144
Total
940,877
1,091,998
1,107,256
---------------------------------------1999
S$'000
95,521
89,025
Singapore
Others
Total
184,546
Assets --------------------------------------2000
2001
S$'000
S$'000
96,196
130,618
162,785
176,567
258,981
307,185
------------------------ Capital expenditure -----------------------
37.
1999
2000
2001
S$'000
S$'000
S$'000
Singapore
Others
3,125
1,092
2,392
1,357
1,963
2,769
Total
4,217
3,749
4,732
Subsequent events
(i)
(ii)
On 1 October 2001, the minority shareholders of a subsidiary, MSI Digiland (Phils.), Inc.
were granted an option to subscribe for an aggregate of 1,142,217 ordinary shares of 100
Pesos each in the capital of the subsidiary. The option will vest on 1 July 2002 and will be
exercisable for five years thereafter. The exercise price per share will be as follows:±
(a)
between 1 July 2002 and 30 June 2004, Pesos 112.5; and
(b)
between 1 July 2004 and 30 June 2007, the value of NTA per share (based on the
latest audited accounts of the subsidiary).
At an Extraordinary General Meeting held on 10 January 2002, the shareholders of the
Company approved, inter alia, the following:±
(a)
the Conversion of the Company into a public limited company and the change of its
name to Digiland International Limited;
(b)
the adoption of the new Articles of Association of the Company;
(c)
the authorised share capital of the Company be increased from S$100,000,000
divided into 100,000,000 ordinary shares of S$1.00 each to S$225,000,000 divided
into 225,000,000 ordinary shares of S$1.00 each;
(d)
the issue of 27,000,000 ordinary shares of S$1.00 each at S$1.185 each for cash to
GIL;
(e)
the subdivision of 1 ordinary share of S$1.00 each into 20 ordinary shares of par value
S$0.05 each in the issued share capital of the Company;
(f)
the issue of 849,504,791 ordinary shares of S$0.05 each to GIL in consideration and
full satisfaction of the outstanding amount of S$42,475,239.55 owed by the Company
to GIL; and
(g)
the consolidation of 3 ordinary shares of S$0.05 each into 1 ordinary share of par
value S$0.15 each in the issued share capital of the Company.
136
K.
NET TANGIBLE ASSETS BACKING OF THE PROFORMA GROUP
The net tangible assets backing of the Proforma Group for each ordinary share of S$0.15 each is
based on the financial information of the Proforma Group as at 30 June 2001 and after taking
into consideration certain proforma adjustments as set out below:±
S$'000
Net tangible assets as at 30 June 2001 of the Proforma Group
Less: Proforma adjustments as disclosed in Note 3
Add: Pre-acquisition reserves included in the Proforma Reserves
Adjusted net tangible assets of the Group as at 30 June 2001
Less: Estimated expenses in connection with the demerger of the Company and its
introduction to the SGX-ST payable by the Company
124,318
(27,513)
8,195
105,000
(4,000)
101,000
Number
of shares
'000
Issued share capital of 38,000,000 ordinary shares of S$1.00 each as at 30 June 2001
38,000
Issue of 27,000,000 ordinary shares of S$1.00 each at S$1.185 per share for cash
27,000
65,000
Subdivision of 1 ordinary share of S$1.00 each into 20 ordinary shares of par value S$0.05
each in the issued share capital of the Company
1,300,000
Issue of 849,504,791 ordinary shares of S$0.05 each to GIL in consideration and full
satisfaction of the outstanding amount of S$42,475,239.55 owed by the Company to GIL
849,505
2,149,505
L.
Consolidation of 3 ordinary shares of S$0.05 each into 1 ordinary shares of par value S$0.15
each in the issued share capital of the Company
716,502
Net tangible assets backing per ordinary share of par value S$0.15 each
S$0.141
DIVIDENDS
No dividends have been declared or paid by the Company or its subsidiaries for the ®nancial
years ended 30 June 1999 to 30 June 2001.
M.
AUDITED FINANCIAL STATEMENTS
No audited ®nancial statements have been prepared for the Company or its subsidiaries for any
period subsequent to 30 June 2001.
Yours faithfully,
Arthur Andersen
Certi®ed Public Accountants
Singapore
Steven Phan Swee Kim
Partner-in-charge
137
ANNEX B
DISTRIBUTION INDUSTRY BACKGROUND
THE IT PRODUCTS INDUSTRY
The worldwide IT Products industry generally consists of:±
.
suppliers, who sell directly to wholesalers, reseller customers, and end-users;
.
wholesale distributors, who sell to reseller customers; and
.
reseller customers, who sell to other reseller customers and directly to end-users.
Suppliers may be broken down into branded and non-branded suppliers. Hewlett Packard and IBM
are examples of branded suppliers who enjoy strong global brand recognition. Our former parent
company, GIL, as the manufacturer of products distributed under the ``Datamini'' and ``DMC''
brands, is an example of an unbranded supplier whose brands may enjoy some local brand
recognition but not international brand recognition. Branded suppliers may distribute their products
either through their own wholesale distribution network or through a third party wholesale distributor
or even engage in direct distribution to end-users. Non-branded suppliers like GIL are more likely to
distribute their products through their own distribution networks.
The reseller customer community comprises a variety of reseller customer categories, including
corporate reseller customers, value-added reseller customers or ``VARs'', systems integrators,
original equipment manufacturers (OEMs), direct marketers, independent dealers, owner-operated
chains, franchise chains and computer retailers. Different types of reseller customers are de®ned and
distinguished by the end-user market they serve, such as large corporate accounts, small and
medium-sized businesses or home users, and by the level of value they add to the basic products
they sell. Wholesale distributors generally sell only to reseller customers and purchase a wide range
of products in bulk directly from manufacturers. Different wholesale distribution models have evolved
in particular countries and geographies depending on the characteristics of the local reseller customer
environment, as well as other factors speci®c to a particular country or region.
The following diagram shows the inter-relationships between suppliers, distributors, reseller
customers and end-users in the IT Products industry.
Suppliers
Branded
Unbranded
Distributors
Reseller
customers
Computer retailers
VARs
Systems Integrators
OEMs
Direct marketers
Independent dealers
Owner-operated chains
Franchise chains
138
End-users
Large corporates
Small to medium-sized enterprises
Home-users
To minimise costs and focus on their core capabilities in manufacturing, product development and
marketing, many suppliers are seeking to outsource an increasing portion of functions such as
distribution and ful®lment, sales services and technical support to the wholesale distribution channel.
Growing product complexity, shorter product life cycles and an increasing number of IT Products have
led reseller customers to depend on wholesale distributors for more of their product, marketing and
technical support needs. In addition, reseller customers are relying to an increasing extent on
wholesale distributors for inventory management and credit to avoid stocking large inventories and
maintaining credit lines to ®nance their working capital needs.
139
ANNEX C
REGULATION
REGULATION OF INTERNATIONAL DISTRIBUTION AND SALES
As an international distributor and retailer of IT Products and other electronic products, we are subject
to the laws and regulations of the different countries where we have operations or sales.
Such laws and regulations would include, among other things:±
.
export controls, including those relating to technology;
.
limitation or licensing requirements involving our wholesale or on-line retail operations;
.
tariffs and other trade barriers;
.
exchange controls;
.
restrictions on repatriation of profits; and
.
taxation.
In certain countries such as China, Hong Kong, Indonesia and Vietnam our operations are organised
around joint ventures or partnerships designed to comply with local laws and regulations. Our ability
to expand our sales or operations in those countries may be limited by the need to identify appropriate
local partners, receive necessary approvals or comply with local regulations.
REGULATION OF THE INTERNET GENERALLY
The laws governing Internet transactions, Internet service providers and on-line service companies
remain largely unsettled, even in areas where there has been some legislative action. The
applicability to the Internet of existing laws governing issues such as intellectual property matters,
taxation, libel, obscenity and personal privacy is unclear. The vast majority of these laws were
adopted prior to the advent of the Internet and related technologies and, as a result, do not
contemplate or address the unique issues they pose. We also operate in multiple jurisdictions where
laws and regulatory requirements differ, increasing the level of uncertainty.
Due to the increasing popularity and use of the Internet and on-line services, we believe it is likely that
new laws and regulations covering our operations will be adopted in countries where we do business.
Because of the rapidly evolving and uncertain regulatory environment, it is dif®cult for us to predict
how changes to existing laws or the passage of new laws addressing the Internet and online
services will affect the way we do business. Such changes to the legal landscape could create
uncertainty in the marketplace, which could result in a reduction in the demand for our services,
restrictions on the services we can provide, increases in the cost of doing business, or other
presently unforeseeable detrimental effects on our business, ®nancial condition and results of
operations.
140
Legal and regulatory risks to which we may be exposed include:±
.
liability for information sent through DigilandCommerce.com;
.
liability for the on-line content of DigilandMall.com;
.
liability for the misappropriation of personal information of our customers by third parties;
.
legal risks and potential liabilities associated with e-commerce activities; and
.
imposition of new taxes or fees by governments on Internet transactions or on the use of the
Internet as a means of communication.
REGULATION OF THE INTERNET IN SINGAPORE
Presently, there is minimal legislation in Singapore regulating the use of the Internet or relating to
privacy, data protection and consumer protection on the Internet. E-commerce transactions are
generally governed by the Electronic Transaction Act (Chapter 88) of Singapore (the `ÈTA'') which
establishes the legal framework for e-commerce transactions in Singapore including how a contract
can be formed electronically, and providing legal status on the use of electronic records and
signatures and their secure counterparts.
The Singapore Broadcasting Authority Act (Chapter 297) of Singapore (the ``SBAA'') regulates Internet
service providers and Internet content providers through the Class Licence Scheme and the Internet
Code of Practice. All Internet service providers and Internet content providers (save for individuals who
put up personal web sites) are automatically licensed under the Class Licence Scheme and are
required to abide by the Internet Code of Practice (the ``Code'') issued pursuant to the SBAA.
The Code was established to prescribe standards of good practice for the healthy growth of the
Internet industry in Singapore. The Code requires, among other things, Internet content providers to
ensure that the material they publish on the Internet is not offensive to the Singapore society. For
example, material that consists of violence or pornography, or material or information that is harmful
to Singapore's racial and religious harmony, is prohibited.
Under the SBAA, Internet content providers are not required to register with the Singapore
Broadcasting Authority unless their web pages are primarily set up to promote political or religious
causes. Registration does not prohibit the promotion of political and religious causes but is aimed at
ensuring that content providers assume responsibility for the content which they publish on the
Internet.
The Singapore Broadcasting Authority has the power to impose sanctions and ®nes on licensees who
fail to comply with the Code of Practice. Whilst our business does not require any registration with the
SBAA, the terms of the class licence and our policy require us to abide by the SBAA and the Internet
Code of Practice.
Traditional laws and legislation continue to apply to the Internet, including laws such as the tort of
con®dence which prohibits the unauthorised use of con®dential information, the Consumer
Protection (Trade Descriptions and Safety Requirements) Act (Chapter 53) which prohibits the use of
false trade descriptions and imposes safety requirements and the Sale of Goods Act (Chapter 393)
which governs transactions relating to the sale of goods.
141
ANNEX D
MATERIAL CONTRACTS AND OTHER DOCUMENTS
Copies of the following documents are available for inspection at the registered office of Digiland at 14
Sungei Kadut Avenue, Singapore 729650 during normal business hours from the date of this
Document up to and including the date the company is listed on the SGX-ST:±
(1)
the Memorandum and Articles of Association of Digiland;
(2)
Sale and Purchase Agreement dated 20 February 2000 between (i) GES, as vendor, and (ii)
Digiland, as purchaser, pursuant to which Digiland purchased all the issued shares in Digiland
Distribution (M) Sdn. Bhd. for an aggregate purchase consideration of S$1;
(3)
Sale and Purchase Agreement dated 20 March 2000 between (i) GES, as vendor, and (ii)
Digiland, as purchaser, pursuant to which Digiland purchased 51 per cent. of the issued shares
in MSI Digiland (Phils.), Inc. for an aggregate purchase consideration of Philippines Pesos
38,844,814;
(4)
Sale and Purchase Agreement dated 15 April 2000 between (i) GES, as vendor, and (ii) Digiland,
as purchaser, pursuant to which Digiland purchased all the issued shares in Digiland Pty Ltd for
an aggregate purchase consideration of S$1;
(5)
Sale and Purchase Agreement dated 15 April 2000 between (i) GIL, as vendor, and (ii) Digiland,
as purchaser, pursuant to which Digiland purchased all the issued shares in Infonet Systems and
Services Pte Ltd for an aggregate purchase consideration of S$599,042;
(6)
Sale and Purchase Agreement dated 15 May 2000 between (i) Digiland, as vendor, and (ii) GES,
as purchaser, pursuant to which Digiland sold 51.86 per cent. of the issued shares in TransEurope Computer Ltd for an aggregate purchase consideration of S$1,219,801;
(7)
Sale and Purchase Agreement dated 30 June 2000 between (i) GES, as vendor, and (ii) Digiland,
as purchaser, pursuant to which Digiland purchased all the issued shares in Digiland (Thailand)
Co., Ltd for an aggregate purchase consideration of Baht 22,841,494;
(8)
Master Services Agreement dated 15 January 2002 between (i) GIL and (ii) Digiland, pursuant to
which the Proforma Digiland Group agreed to provide certain services to the Proforma GIL
Group (and vice versa) on such terms as may be agreed between them; and
(9)
Letters of Undertaking dated 15 January 2002 from Digiland to GIL and GES respectively, to, (i)
within 6 months of the listing of Digiland, discharge them from the guarantees they have given
for our Proforma Group's bene®t, and (ii) to indemify them against any claims that may arise from
such guarantees.
142
ANNEX E
OUR WEB SITES AND MIS SYSTEMS
DIGILANDCOMMERCE.COM
Upon being provided a personalised logon identity and password, a reseller customer can navigate
our web site to access information on matters ranging from inventory levels to the status of a
purchase order in a virtual instant over the Internet. Most importantly, the Internet enables our
reseller customers to execute orders more quickly than they were able to before. Set out at the end
of this Annex is a graphic illustration of our DigilandCommerce.com homepage.
Browsing. We have categorised the products that we currently offer into broad sets of product groups,
such as personal computers, printers, scanners, notebooks, accessories, servers, modems, monitors,
networking devices, plotters and printer supplies. By clicking on a category, the reseller customer can
quickly target products of interest. Once inside the product group category, our reseller customers
can browse among brands and model types to ®nd the product that they need. In addition to the
price and quantities available, we provide speci®cations, and often a photograph, of each product to
ensure that our reseller customers have the information necessary to ful®l their inventory needs.
Searching. A primary feature of the DigilandCommerce.com web site is its interactive search engine.
We provide a selection of search tools that allow customers to ®nd items based on pre-selected
criteria such as product type, brand, manufacturer and product part number. Customers can also
use more complex and precise search tools such as Boolean search queries.
Product Information. For most products, detailed information is available, including descriptions,
speci®cations and product pictures. The price of each item and stock availability are also given. In
addition, the reseller customer is able to determine the credit terms applicable to each product and
its own available credit. The details provided differ depending upon the type of product concerned.
Ordering. Simply by clicking, a reseller customer can ®ll its inventory requirements as it navigates from
product to product and from brand to brand. Before executing a purchase order, a summary of the
purchase request is provided and the reseller customer is given the opportunity to review the details
of and make any necessary adjustments to the purchase request prior to ®nalising the transaction.
Once satis®ed, a click of the mouse submits the order.
Credit Control. We will evaluate the creditworthiness of our clients through an internal process before
deciding the amount of credit to extend to a customer. Further, the terms and conditions governing
transactions conducted over DigilandCommerce.com provide that no contract will exist between us
and the reseller customer until we have accepted the order and that title to the goods sold will
remain with us until payment has been made.
Ful®lment. Once an order is placed, we ful®l it through our distribution channels. By streamlining the
order process and placing more information in the hands of our customers, we believe our Internetbased system has made our overall ful®lment process more ef®cient.
We intend, where viable, to establish additional localised web sites with local suppliers, languages and
characters in China, Indonesia and Vietnam. We have targeted countries based on overall ecommerce readiness, population size and strategic importance to us. By leveraging our existing
technology and capability, we are capable of rapidly deploying our e-commerce infrastructure for
rapid regional expansion.
143
DIGILANDMALL.COM
DigilandMall.com is a web site tailored to appeal to the consumer market through which residents of
Singapore, Malaysia and Australia can purchase IT Products and other electronic products on-line.
DigilandMall.com incorporates many of the browsing, searching, and product description features of
DigilandCommerce.com but also features more product information and promotional material and is
more graphically intensive than DigilandCommerce.com.
Given the different constituencies that our two web sites are seeking to serve, DigilandMall.com differs
from DigilandCommerce.com in that:±
.
it is more marketing-oriented, with special features offering promotions and gift ideas and
tracking top-selling items;
.
it contains more graphic illustrations and photographs, the intention being to catch the eye of the
browsing consumer who might not be as familiar with IT Products as a reseller customer would
be;
.
it provides the consumer with a ``virtual shopping cart'', into which the consumer can place
items that he or she wishes to purchase when navigating among the different products and
brands offered by DigilandMall.com; and
.
it requires that purchases be made by credit card or by payment upon delivery at a buyerspeci®ed location because, unlike DigilandCommerce.com with its reseller customers,
DigilandMall.com does not have the direct relationships with its retail customers that would
enable payment to be made by another means.
Digiland MIS Infrastructural Links
Digiland Call Centre
Wholesale Distribution Web site
(D igilandCommerce)
On-line Retail Web site
(DigilandMall)
E-Commerce
ERP Integration
ERP
MFG/PRO
OLAP
DigilandQuikView
Note:ERP - Enterprise Resource Planning
OLAP - Online Analytical Processing
E-COMMERCE SYSTEM
Our E-Commerce System is based on an operating infrastructure which is designed to be scalable
and reliable. The infrastructure consists of several sub-systems, including a scalable application
server used to service user requests for a web server. We use readily available, off-the-shelf
computer systems, including advanced Intel Pentium servers in a fully redundant con®guration, and
a proprietary architecture deploying primarily RISC technology running the HP-UNIX Operating
System.
Security features such as ®rewalls, password control, Security Socket Layers and digital signatures
have also been included in our software systems to ensure that applications which share networks
remain secure for users.
144
We maintain our own data centre at our headquarters in Singapore and access the Internet through a
Singapore-based Internet access service provider which provides us with multiple backbone
connections to the Internet. We have an operations and disaster recovery plan, and our e-commerce
system is backed up nightly to a storage facility maintained by a third party. We intend to have in
place our own off-site back-up data centre when needs arise.
MFG/PRO is an ERP system from QAD Inc. which integrates substantially all aspects of our business.
This is a single, standardised, real-time information system and operating environment, used across
substantially all of our operations. It has been customised as necessary for use in all countries in
which we operate and has the capability to handle multiple languages and currencies. On a daily
basis, this system typically handles 5,000 on-line transactions and 1,000 orders. We have designed
this system as a scalable system that has the capability to support increased transaction volume.
Our network of over 200 user stations is able to obtain a response from the system in seconds.
Our DigilandQuikView, which was developed based on Hyperion's OLAP Technology, is in turn
integrated with MFG/PRO. This system enables our management to analyse our performance at
various levels based on information collated from MFG/PRO and our B2B system. The system is
able to measure performance through a variety of performance indicators and this in turn assists
management to identify more quickly the areas which require improvement and, accordingly,
implement the appropriate measures.
We believe our integrated systems provide an infrastructure that allows the implementation of a
customer-centric channel model. The integrated systems provide the information necessary for us to
act as the agent of commerce among suppliers, reseller customers and end-users.
145
146
ANNEX F
RESPONSIBILITY STATEMENTS BY DIRECTORS AND SPONSOR
RESPONSIBILITY STATEMENT BY DIRECTORS
The Directors, individually and collectively accept full responsibility for the accuracy of the information
given in this Document and con®rm, having made all reasonable enquiries, that to the best of their
knowledge, information and belief, there are no other material facts, the omission of which would
make any statement in this Document misleading and that this Document constitutes full and true
disclosure of all material facts about the Introduction, the Company and its subsidiaries and
associated companies.
RESPONSIBILITY STATEMENT BY SPONSOR
DBS Bank acknowledges, having made all reasonable enquiries, based on information made available
to it, that to the best of its knowledge, information and belief, it is not aware of any other material facts
the omission of which would make any statement in this Document misleading and that this
Document constitutes full and true disclosure of all material facts about the Introduction, the
Company and its subsidiaries and associated companies.
147
ANNEX G
RULES OF THE DIGILAND SHARE OPTION PLAN
1.
NAME OF PLAN
This Plan shall be called the ``Digiland Share Option Plan''.
2.
INTERPRETATION
2.1
De®nitions. In this Plan, unless the context otherwise requires, the following words and
expressions shall have the following meanings:±
`Àct''
The Companies Act, Chapter 50 of Singapore
`Àggregate Subscription
Cost''
The total amount payable for the Shares to be subscribed for on
the exercise of an Option
`Àrticles''
The Articles of Association of the Company, as amended from time
to time
`Àssociated Company''
A company (i) in which at least 20 per cent. but not more than 50
per cent. of its shares are held by the Company and any of its
subsidiaries in aggregate and (ii) over which the Company has
control
`Àssociated Company
Employee''
Any employee of an Associated Company (including any director of
an Associated Company who performs an executive function)
`Àssociated Company
Non-Executive Director''
A director of an Associated Company who does not perform an
executive function
`Àuditors''
The auditors of the Company for the time being
``CDP''
The Central Depository (Pte) Limited
``CPF''
The Central Provident Fund
``Committee''
A committee comprising directors of the Company and such other
persons as the board of directors of the Company may nominate,
duly authorised and appointed by the board of director of the
Company to administer this Plan
``Company''
``Date of Grant''
In relation to an Option, the date on which that Option is granted
``Director''
In relation to any company, a director of that company for the time
being
`Èxercise Period''
The period during which an Option is exercisable, being:±
(1)
in the case of an Option granted to a Group Employee, at a
Subscription Price which is equal to or more than the Market
Price on the Date of Grant, a period commencing after the
®rst anniversary, and expiring on the tenth anniversary, of the
Date of Grant;
(2)
in the case of an Option granted to a Group Employee, at a
Subscription Price which is less than the Market Price on the
Date of Grant, a period commencing after the second
anniversary, and expiring on the tenth anniversary, of the
Date of Grant;
148
(3)
in the case of an Option granted to a Group Non-Executive
Director, Associated Company Employee or Associated
Company Non-Executive Director, at a Subscription Price
which is equal to or more than the Market Price on the Date
of Grant, a period commencing after the ®rst anniversary, and
expiring on the ®fth anniversary, of the Date of Grant (or, if
applicable laws permit, on such later date as the Committee
may specify on the Date of Grant); and
(4)
in the case of an Option granted to a Group Non-Executive
Director, Associated Company Employee or Associated
Company Non-Executive Director, at a Subscription Price
which is less than the Market Price on the Date of Grant, a
period commencing after the second anniversary, and
expiring on the ®fth anniversary of, the Date of Grant (or, if
applicable laws permit, on such later date as the Committee
may specify on the Date of Grant)
subject to Rules 8 and 9 and to any other conditions as the
Committee may determine from time to time
``Group''
The Company and its subsidiaries
``Group Employee''
Any employee of the Company or any of its subsidiaries (including
any director of the Company or any of its subsidiaries who
performs an executive function)
``Group Non-Executive
Director''
A director of the Company or any of its subsidiaries who does not
perform an executive function
``Listing Manual''
The Listing Manual of the SGX-ST
``Market Day''
A day on which the SGX-ST is open for trading in securities
``Market Price''
In relation to an Option, the price per Share equal to the average of
the last dealt prices for Shares on the SGX-ST over the ®ve
consecutive Trading Days immediately preceding the Date of
Grant of that Option, as published in the daily of®cial list of the
SGX-ST
`Òption''
An option, granted or to be granted under this Plan, to subscribe
for new Shares
``Participant''
The holder of an Option
``Plan''
The Digiland Share Option Plan, as may be amended or
supplemented from time to time
``Share'' or ``Shares''
Ordinary share or shares of S$0.15 each in the capital of our
Company
``SGX-ST''
Singapore Exchange Securities Trading Limited and any other
stock exchange on which the Shares are for the time being
quoted or listed
``Subscription Price''
In relation to a Share comprised in an Option, the price at which a
Participant shall subscribe for that Share on the exercise of the
Option
``Trading Day''
A Market Day on which the Shares are traded on the SGX-ST
149
``Vesting Schedule''
In relation to an Option, a schedule for the vesting of Shares
comprised in that Option during the Exercise Period in relation to
that Option to be determined by the Committee on the Date of
Grant of that Option.
``S$''
Singapore dollar.
2.2
Control. For the purposes of this Plan, the Company shall be deemed to have ``control'' over
another company if it has the capacity to dominate decision-making, directly or indirectly, in
relation to the ®nancial and operating policies of that company.
2.3
Miscellaneous. Words importing the singular number shall, where applicable, include the plural
number and vice versa. Words importing the masculine gender shall, where applicable, include
the feminine and neuter genders. Any reference in this Plan to a time of a day is a reference to
Singapore time. Any reference in this Plan to any enactment is a reference to that enactment as
for the time being amended or re-enacted. Any word de®ned under the Act or any statutory
modi®cation thereof and used in this Plan shall have the meaning assigned to it under the Act.
3.
PLAN OBJECTIVES
This Plan is a share incentive scheme. The objectives of this Plan are as follows:±
(1)
to attract outstanding new employees who will contribute to the success and development
of the Group;
(2)
to retain key employees whose contributions are important to the long-term growth and
profitability of the Group;
(3)
to motivate employees to raise their work performance and efficiency;
(4)
to align the interests of employees with those of the shareholders of the Company; and
(5)
to recognise those who have contributed or will contribute to the success and development
of the Group.
4.
ELIGIBILITY
4.1
Eligible Persons. Subject to Rule 4.2, the following persons shall be eligible to participate in this
Plan at the discretion of the Committee:±
4.2
(1)
Group Employees who, as of the Date of Grant, (i) are 21 years old or more, (ii) hold such
rank as the Committee may designate from time to time and (iii) have been in the full-time
employment of the Group for such period as the Committee may designate from time to
time;
(2)
Group Non-Executive Directors who, in the opinion of the Committee, have contributed or
will contribute to the success and development of the Group;
(3)
Associated Company Employees (i) who, as of the Date of Grant, (a) are 21 years old or
more, (b) hold such rank as the Committee may designate from time to time and (c) have
been in the full-time employment of the relevant Associated Company for such period as
the Committee may designate from time to time and (ii) who, in the opinion of the
Committee, have contributed or will contribute to the success and development of the
Group; and
(4)
Associated Company Non-Executive Directors who, in the opinion of the Committee, have
contributed or will contribute to the success and development of the Group.
Controlling Shareholders and Associates. Notwithstanding anything in this Plan, any person
who is a controlling shareholder (as those terms are de®ned in the SGX-ST Listing Manual) of
the Company or an associate (as those terms are de®ned in the SGX-ST Listing Manual) of
such controlling shareholder shall not be eligible to participate in this Plan.
150
5.
PLAN LIMITS
Plan Limit. The number of Shares over which the Committee may grant Options on any date,
when aggregated with the number of Shares issued and issuable in respect of (i) all Options
granted under this Plan and (ii) all awards granted under any other share-based incentive plan
implemented by the Company and for the time being in force, shall not exceed 15 per cent. of
the issued share capital of the Company on the day preceding that date.
6.
GRANT AND ACCEPTANCE OF OPTIONS
6.1
Timing of Grant. The Committee may grant Options to any eligible person at any time during
the period when this Plan is in force, provided that the Committee shall not grant any Options
during the period (i) of 30 days immediately preceding the date of announcement of the
®nancial results of the Group and (ii) of three Market Days after an announcement on any
matter of an exceptional nature involving unpublished price sensitive information is released.
6.2
Size of Grant. The Committee shall have the discretion to determine the number of Shares
comprised in Options to be granted to any eligible person, taking into account criteria such as
rank, job performance, years of service, potential for future development and contribution to the
success and development of the Group.
6.3
Letter of Offer. The Letter of Offer to grant an Option shall be in, or substantially in, the form set
out in Schedule 1 (subject to such modi®cation as the Committee may from time to time
determine). An Option may be granted subject to such conditions as the Committee may
determine on the Date of Grant of that Option.
6.4
Option Not Assignable. An Option shall be personal to the person to whom it is granted and
shall not be transferred (other than to a Participant's personal representative on the death of
that Participant), charged, assigned, pledged or otherwise disposed of, in whole or in part,
except with the prior approval of the Committee.
6.5
Acceptance Form. A person to whom an Option is granted shall accept the grant by
completing, signing and returning the Acceptance Form in, or substantially in, the form set out
in Schedule 2 (subject to such modi®cation as the Committee may from time to time determine),
accompanied by payment of S$1.00 as consideration, not later than 5.00 p.m. on the day falling
30 days after the Date of Grant of the Option.
6.6
Lapse of Grant. If a grant of an Option is not accepted in accordance with Rule 6.5, it shall,
upon the expiry of the 30-day period, automatically lapse and become null and void.
7.
SUBSCRIPTION PRICE
7.1
Subscription Price. Subject to Rule 7.3 and any adjustment under Rule 11, the Committee shall,
on the Date of Grant, determine the Subscription Price of an Option to be either:±
7.2
7.3
(1)
a price equal to the Market Price or such higher price as the Committee may determine; or
(2)
a price which is set at a discount to the Market Price, the quantum of the discount to be
determined by the Committee, provided that the maximum discount which may be given
shall not exceed 20 per cent. of the Market Price.
Discount Considerations. In determining whether to give a discount and the quantum of the
discount, the Committee may consider such criteria as it deems appropriate, including but not
limited to:±
(1)
the performance of the Group or the relevant Associated Company, as the case may be;
(2)
the years of service and individual performance of the Participant;
(3)
the contribution of the Participant to the success and development of the Group; and
(4)
the prevailing market conditions.
Par Value.
The Subscription Price shall in no event be less than the nominal value of a Share.
151
8.
RIGHT TO EXERCISE OPTIONS
8.1
Exercise of Options. Subject as provided in Rules 8 and 9, an Option shall be exercisable, in
whole or in part, during the Exercise Period applicable to that Option and in accordance with
the Vesting Schedule (if any) and the conditions (if any) applicable to that Option.
8.2
Lapse of Options. An Option shall, to the extent unexercised, immediately lapse without any
claim whatsoever against the Company:±
(1)
in the event of misconduct on the part of the Participant as determined by the Committee;
or
(2)
subject to Rule 8.3(2), where the Participant ceases at any time to be in the employment of
the Group or an Associated Company for any reason whatsoever.
For the purpose of Rule 8.2(2), the Participant shall be deemed to have ceased to be so
employed as of the date the notice of termination of employment is tendered by or is given to
him, unless such notice shall be withdrawn prior to its effective date.
For the avoidance of doubt, no Option shall lapse pursuant to Rule 8.2(2) in the event of the
transfer of employment of a Participant between the Group and any Associated Company.
8.3
Certain Events. In any of the following events, namely:±
(1)
the bankruptcy of the Participant or the happening of any other event which results in his
being deprived of the legal or beneficial ownership of an Option;
(2)
where the Participant ceases at any time to be in the employment of any of the Group or an
Associated Company by reason of:±
(a)
ill health, injury or disability (in each case, evidenced to the satisfaction of the
Committee);
(b)
redundancy;
(c)
retirement at or after the legal retirement age;
(d)
retirement before the legal retirement age with the consent of the Committee; or
(e)
the company by which he is employed ceasing to be a company within the Group or
an Associated Company or the undertaking or part of the undertaking of such
company being transferred otherwise than to another company within the Group or
to an Associated Company;
(3)
where a Participant, being a non-executive director, ceases at any time to be a Director of
any company within the Group or an Associated Company for any reason whatsoever;
(4)
the death of a Participant; or
(5)
any other event approved by the Committee,
an Option then held by that Participant shall, to the extent unexercised, lapse without any claim
whatsoever against the Company, unless otherwise determined by the Committee in its
discretion. In exercising such discretion, the Committee may:±
(aa) determine the number of Shares comprised in that Option which may be exercised and the
period during which such Option shall be exercisable, being a period not later than the
expiry of the Exercise Period in respect of that Option. Such Option may be exercised at
any time notwithstanding that the date of exercise of such Option falls on a date prior to
the first day of the Exercise Period in respect of such Option. Upon the expiry of such
period as determined by the Committee, the Option, to the extent unexercised, shall
lapse; or
(bb) allow that Participant to exercise any unexercised Option(s) in the manner and at the times
provided in Rule 8.1.
152
8.4
Suspension. Notwithstanding any provision to the contrary, the Committee may by notice to a
Participant, suspend the exercise of any Option for such period or periods as the Committee
may determine, provided that the period(s) of suspension shall not exceed in aggregate 60
days in any one calendar year.
9.
TAKE-OVER AND WINDING-UP OF COMPANY
9.1
Take-over. Notwithstanding Rule 8 but subject to Rule 9.5, in the event of a take-over being
made for the Shares, a Participant shall be entitled to exercise any Option held by him and as
yet unexercised, in respect of such number of Shares comprised in that Option as the
Committee may determine, in the period commencing on the date on which such offer is made
or, if such offer is conditional, the date on which such offer becomes or is declared
unconditional, as the case may be, and ending on the earlier of:±
(1)
the expiry of six (6) months thereafter, unless prior to the expiry of such six-month period,
at the recommendation of the offeror and with the approvals of the Committee, the SGX-ST
and/or such other relevant regulatory authority, such expiry date is extended to a later date
(in either case, being a date falling not later than the expiry of the Exercise Period relating
thereto); or
(2)
the date of expiry of the Exercise Period relating thereto,
whereupon the Option then remaining unexercised shall lapse.
Provided that if during such period, the offeror becomes entitled or bound to exercise rights of
compulsory acquisition under the provisions of the Act and, being entitled to do so, gives notice
to the Participants that it intends to exercise such rights on a speci®ed date, the Option shall
remain exercisable by the Participant until the expiry of such speci®ed date or the expiry of the
Exercise Period relating thereto, whichever is earlier. Any Option not so exercised shall lapse,
provided that the rights of acquisition or obligations to acquire shall have been exercised or
performed, as the case may be. If such rights or obligations have not been exercised or
performed, the Option shall, notwithstanding Rule 8, remain exercisable until the expiry of the
Exercise Period relating thereto.
9.2
Scheme of Arrangement. If under the Act, the court sanctions a compromise or arrangement
proposed for the purposes of, or in connection with, a scheme for the reconstruction of the
Company or its amalgamation with another company or companies, each Participant shall be
entitled, notwithstanding Rule 8 but subject to Rule 9.5, to exercise any Option then held by
him, in respect of such number of Shares comprised in that Option as the Committee may
determine, during the period commencing on the date upon which the compromise or
arrangement is sanctioned by the court and ending either on the expiry of 60 days thereafter or
the date upon which the compromise or arrangement becomes effective, whichever is later (but
not after the expiry of the Exercise Period relating thereto), whereupon the Option shall lapse and
become null and void.
9.3
Insolvent Winding-Up. If an order is made for the winding-up of the Company on the basis of
its insolvency, all Options, to the extent unexercised, shall lapse and become null and void.
9.4
Solvent Winding-Up. In the event of a members' solvent voluntary winding-up (other than for
amalgamation or reconstruction), the Participant shall be entitled, within 30 days of the passing
of the resolution of such winding-up (but not after the expiry of the Exercise Period relating
thereto), to exercise any unexercised Option in respect of such number of Shares comprised in
that Option as the Committee may determine, after which such unexercised Option shall lapse
and become null and void.
153
9.5
Other Arrangements. If, in connection with the making of a general offer referred to in Rule 9.1
or the scheme referred to in Rule 9.2 or the winding-up referred to in Rule 9.4, arrangements are
made (which are con®rmed in writing by the Auditors, acting only as experts and not as
arbitrators, to be fair and reasonable) for the compensation of Participants, whether by the
continuation of their Options or the payment of cash or the grant of other options or otherwise,
a Participant holding an Option, as yet not exercised, may not, at the discretion of the
Committee, be permitted to exercise that Option as provided for in this Rule 9.
9.6
Lapse of Options. To the extent that an Option is not exercised within the periods referred to in
this Rule 9, it shall lapse and become null and void.
10.
EXERCISE OF OPTIONS, ALLOTMENT AND LISTING OF SHARES
10.1 Full or Partial Exercise. Subject to Rule 8, an Option may be exercised, in whole or in part.
10.2 Exercise Notice. A Participant may exercise an Option by giving a written Exercise Notice to the
Company in, or substantially in, the form set out in Schedule 3 (subject to such modi®cation as
the Committee may from time to time determine). The Exercise Notice must be accompanied by
payment in cash for the Aggregate Subscription Cost in respect of the Shares for which that
Option is exercised and any other documentation the Committee may require. An Option shall
be deemed to be exercised upon receipt by the Company of the said notice, duly completed,
and the Aggregate Subscription Cost. All payments made shall be made by cheque, cashiers'
order, banker's draft or postal order made out in favour of the Company or such other mode of
payment as may be acceptable to the Company.
10.3 Allotment of Shares. Subject to such consents or other required action of any competent
authority under any regulations or enactments for the time being in force as may be necessary
and subject to the compliance with the terms of this Plan, the Articles and the Memorandum of
Association of the Company, the Company shall, within ten Market Days after the exercise of an
Option, allot the relevant Shares and despatch to CDP the relevant share certi®cates by ordinary
post or such other mode as the Committee may deem ®t.
10.4 Listing of Shares. The Company shall, as soon as practicable after such allotment, apply to the
SGX-ST for permission to deal in and for quotation of such Shares.
10.5 Crediting of Shares. Shares which are allotted on the exercise of an Option by a Participant
shall be issued in the name of CDP to the credit of (i) the securities account of that Participant
maintained with CDP, (ii) the securities sub-account of that Participant maintained with a
Depository Agent or (iii) the CPF investment account maintained with a CPF agent bank, in
each case as designated by the Participant.
10.6 Pari Passu Ranking.
Shares allotted and issued on exercise of an Option shall:±
(1)
be subject to all the provisions of the Articles and the Memorandum of Association of the
Company; and
(2)
rank in full for all entitlements, including dividends or other distributions declared or
recommended in respect of the then existing Shares, the Record Date for which is on or
after the relevant date upon which such exercise occurred, and shall in all other respects
rank pari passu with other existing Shares then in issue.
``Record Date'' means the date ®xed by the Company for the purposes of determining
entitlements to dividends or other distributions to or rights of holders of Shares.
10.6 Reserved Shares. The Company shall keep available suf®cient unissued Shares to satisfy the
full exercise of all Options for the time being remaining capable of being exercised.
154
11.
ADJUSTMENT EVENTS
11.1 Adjustment Events. If a variation in the issued ordinary share capital of the Company (whether
by way of a capitalisation of profits or reserves or rights issue, reduction, subdivision,
consolidation, distribution or otherwise) shall take place, then:±
(1)
the Subscription Price, the nominal amount, class and/or number of Shares comprised in
an Option to the extent unexercised; and/or
(2)
the nominal amount, class and/or number of Shares over which future Options may be
granted under this Plan,
shall be adjusted in such manner as the Committee may determine to be appropriate (but, to the
extent reasonably practicable, the adjustment should give a Participant the same proportion of
the equity capital as that to which he was previously entitled).
11.2 Non-Adjustment Events. Unless the Committee considers an adjustment to be appropriate, (i)
the issue of securities as consideration for an acquisition, (ii) the private placement of securities
or (iii) the cancellation of issued Shares purchased or acquired by the Company by way of a
market purchase of such Shares undertaken by the Company on the SGX-ST during the period
when a share purchase mandate granted by shareholders of the Company (including any
renewal of such mandate) is in force, shall not normally be regarded as a circumstance
requiring adjustment.
11.3 Par Value; Auditor's Confirmation.
Notwithstanding the provisions of Rule 11.1:±
(1)
no such adjustment shall be made if as a result, the Subscription Price shall fall below the
nominal amount of a Share and if such adjustment would, but for this paragraph (1), result
in the Subscription Price being less than the nominal amount of a Share, the Subscription
Price payable shall be the nominal amount of a Share; and
(2)
any adjustment (except in relation to a capitalisation issue) must be con®rmed in writing by
the Auditors (acting only as experts and not as arbitrators) to be, in their opinion, fair and
reasonable.
11.4 Notice of Adjustment. Upon any adjustment required to be made pursuant to this Rule 11, the
Company shall notify the Participant (or his duly appointed personal representatives, where
applicable) in writing and deliver to him (or his duly appointed personal representatives, where
applicable) a statement setting forth the Subscription Price thereafter in effect and the nominal
amount, class and/or number of Shares thereafter to be issued on the exercise of Option. Any
adjustment shall take effect upon such written noti®cation being given.
12.
ADMINISTRATION OF PLAN
12.1 Committee. This Plan shall be administered by the Committee in its discretion with such
powers and duties as are conferred on it by the board of directors of the Company, provided
that no member of the Committee shall participate in any deliberation or decision in respect of
Options to be granted to him or held by him.
12.2 Regulations. The Committee shall have the power, from time to time, to make and vary such
regulations (not being inconsistent with this Plan) for the implementation and administration of
this Plan as they think ®t. Any matter pertaining or pursuant to this Plan and any dispute and
uncertainty as to the interpretation of this Plan, any rule, regulation or procedure thereunder or
any rights under this Plan shall be determined by the Committee.
12.3 Liability. Neither this Plan nor the grant of Options under this Plan shall impose on the
Company or the Committee any liability whatsoever in connection with:±
(1)
the lapsing or early expiry of Options pursuant to any provision of this Plan;
(2)
the failure or refusal by the Committee to exercise, or the exercise by the Committee of,
any discretion under this Plan; and/or
(3)
any decision or determination of the Committee made pursuant to any provision of this
Plan.
155
12.4 Decision Final and Binding. Any decision or determination of the Committee made pursuant to
any provision of this Plan (other than a matter to be certi®ed by the Auditors) shall be ®nal,
binding and conclusive.
13.
NOTICES
13.1 Notice by Participant. Any notice required to be given by a Participant to the Company shall be
sent or made to the registered of®ce of the Company or such other addresses (including
electronic mail addresses) or facsimile number, and marked for the attention of the Committee,
as may be noti®ed by the Company to him in writing.
13.2 Notice by Company. Any notices or documents required to be given to a Participant or any
correspondence to be made between the Company and the Participant shall be given or made
by the Committee (or such person(s) as it may from time to time direct) on behalf of the
Company and shall be delivered to him by hand or sent to him at his home address, electronic
mail address or facsimile number according to the records of the Company or the last known
address, electronic mail address or facsimile number of the Participant.
13.3 Delivery of Notice. Any notice or other communication from a Participant to the Company shall
be irrevocable, and shall not be effective until received by the Company. Any other notice or
communication from the Company to a Participant shall be deemed to be received by that
Participant, when left at the address speci®ed in Rule 13.2 or, if sent by post, on the day
following the date of posting or, if sent by electronic mail or facsimile transmission, on the day
of despatch.
14.
MODIFICATIONS TO PLAN
14.1 Modification. The Committee may at any time and from time to time by resolution modify or
alter any or all the provisions of this Plan, except that:±
(1)
no modification or alteration shall alter adversely the rights attaching to any Option granted
prior to such modification or alteration except with the consent in writing of such number of
Participants who, if they exercised their Options in full, would thereby become entitled to
not less than 75 per cent. in nominal amount of all Shares which would fall to be allotted
upon the exercise in full of all outstanding Options;
(2)
the definitions of `Àssociated Company'', `Àssociated Company Employee'', `Àssociated
Company Non-Executive Director'', `Èxercise Period'', ``Group Employee'', ``Group
Employee Non-Executive Director'', ``Participant'' and ``Subscription Price'' and the
provisions of Rules 4, 5, 6, 7, 8, 9, 10, 11, 12 and this Rule 14 shall not be altered to the
advantage of Participants except with the prior approval of the Company's shareholders in
general meeting; and
(3)
no modi®cation or alteration shall be made without the prior approval of the SGX-ST and
such other regulatory authorities as may be necessary.
14.2 Modi®cation for Compliance. Notwithstanding anything to the contrary contained in Rule 14.1,
the Committee may at any time and from time to time by resolution (and without other formality,
save for the prior approval of the SGX-ST) amend or alter this Plan in any way to the extent
necessary to cause this Plan to comply with any statutory provision or the provision or the
regulations of any regulatory or other relevant authority or body (including the SGX-ST).
14.3 Notice of Modi®cation. Written notice of any modi®cation or alteration made in accordance with
this Rule 14 shall be given to all Participants.
15.
TERMS OF EMPLOYMENT UNAFFECTED
The terms of employment of a Participant (being a Group Employee or an Associated Company
Employee, as the case may be) shall not be affected by his participation in this Plan, which shall
neither form part of such terms nor entitle him to take into account such participation in
calculating any compensation or damages on the termination of his employment for any reason.
156
16.
DURATION OF PLAN
16.1 Duration. This Plan shall continue to be in force at the discretion of the Committee, subject to a
maximum period of ten years commencing on the date on which this Plan is adopted by the
Company in general meeting, provided always that this Plan may continue beyond such period
with the approval (i) of the Company's shareholders by ordinary resolution in general meeting
and (ii) of any relevant authorities which may then be required.
16.2 Termination. This Plan may be terminated at any time (i) by the Committee or (ii) at the
discretion of the Committee, by resolution of the Company in general meeting, subject to all
relevant approvals which may be required. If this Plan is so terminated, no further Options may
be granted.
16.3 Effect of Termination. The termination of this Plan shall not affect Options which have been
granted and duly accepted in accordance with Rule 6.5, whether such Options have been
exercised (fully or partially) or not.
17.
TAXES
All taxes (including income tax) arising from the exercise of any Option granted to any Participant
shall be borne by that Participant.
18.
COSTS AND EXPENSES OF PLAN
18.1 Fees Borne by Participants. Each Participant shall be responsible for all fees of CDP in
connection with the issue and allotment of Shares pursuant to the exercise of Options in CDP's
name and the deposit of share certi®cate(s) with (i) CDP, (ii) the Participant's securities account
with CDP, (iii) the Participant's securities sub-account with a CDP Depository Agent or (iv) the
Participant's CPF investment account with a CPF agent bank.
18.2 Fees Borne by Company. Save for the taxes referred to in Rule 17 and such other costs and
expenses expressly provided in this Plan to be payable by the Participants, all fees, costs and
expenses incurred by the Company in relation to this Plan (including but not limited to the fees,
costs and expenses relating to the allotment and issue of Shares pursuant to the exercise of
Options) shall be borne by the Company.
19.
DISCLAIMER OF LIABILITY
Notwithstanding any provision contained in this Plan, the Committee and the Company shall not
under any circumstances be liable for any costs, expenses, losses and damages whatsoever and
howsoever arising in any event (including but not limited to the Company's delay in issuing
Shares or applying for or procuring the listing of Shares on the SGX-ST).
20.
ANNUAL REPORT DISCLOSURES
So long as this Plan continues in operation, the Company will make the following disclosures in
its annual report:±
(1)
the names of the members of the Committee;
(2)
the following information in respect of (i) Participants who are Directors of the Company
and (ii) Participants (other than those in (i)) who have been granted Options under this
Plan which, in aggregate, represent five per cent. or more of the total number of Shares
available under this Plan:±
(a)
the name of the Participant;
(b)
Options granted during the financial year under review (including the terms thereof);
(c)
the aggregate number of Shares comprised in Options granted since the
commencement of this Plan to the end of the financial year under review;
157
(3)
21.
(d)
the aggregate number of Shares issued from Options exercised since the
commencement of this Plan to the end of the financial year under review; and
(e)
the aggregate number of Shares comprised in Options outstanding as at the end of
the ®nancial year under review; and
the number and proportion of Shares comprised in Options granted during the financial
year under review at a Subscription Price which represents:±
(a)
a discount of 10 per cent. or less to the Market Price; and
(b)
a discount of more than 10 per cent. to the Market Price.
DISPUTES
Any disputes or differences of any nature arising under this Plan shall be referred to the
Committee and its decision shall be ®nal and binding in all respects.
22.
GOVERNING LAW AND JURISDICTION
This Plan shall be governed by, and construed in accordance with, the laws of Singapore. By
accepting Options in accordance with this Plan, Participants submit to the non-exclusive
jurisdiction of the courts of Singapore.
158
SCHEDULE 1
FORM OF LETTER OF OFFER
To:
[Name]
[Designation]
[Address]
Serial No.:
Date:
Dear Sir/Madam,
Digiland Share Option Plan
Letter of Offer
1.
We are pleased to inform you that we have nominated you to participate in the Plan as a [Group
Employee/Group Non-Executive Director/Associated Company Employee/Associated Company
Non-Executive Director](1). Terms de®ned in the Plan shall have the same meaning when used
in this Letter of Offer.
2.
We hereby offer to grant you an Option to subscribe for [
] Shares at the Subscription Price
of S$* per Share. [The Subscription Price represents a [discount/premium](1) of [
] per cent.
to the Market Price](2).
3.
[The Option shall be exercisable at the times, and in respect of the number of Shares, set out in
the attached Vesting Schedule.](3) [State additional conditions, if any.]
4.
The last date for the exercise of the Option is [
5.
The Option is personal to you. You may not transfer, charge, pledge, assign or otherwise
dispose of the Option, in whole or in part, except with the prior approval of the Committee.
6.
The Option is subject to the Rules of the Plan, a copy of which is available for inspection at the
registered of®ce of the Company.
7.
If you wish to accept the offer of the Option, please sign and return the attached Acceptance
Form, together with a sum of S$1, not later than 5.00 p.m. on [
], failing which the offer will
lapse.
](4).
Yours faithfully,
Notes:±
(1) Delete accordingly.
(2) Insert only if the Subscription Price is not equal to the Market Price.
(3) Insert only if a Vesting Schedule applies.
(4) Note that different Exercise Periods apply.
159
SCHEDULE 2
FORM OF ACCEPTANCE FORM
To:
The Committee,
Digiland Share Option Plan,
14, Sungei Kadut Avenue,
Singapore 729650.
Serial No.:
Date:
Dear Sirs,
Acceptance Form
Eligibility of Participant under the Plan
:
Closing date for acceptance of Option
:
Number of Shares comprised in Option
:
1.
I have read your Letter of Offer dated [
] and agree to be bound by its terms and the Plan.
Terms de®ned in the Plan shall have the same meanings when used in this Acceptance Form.
2.
I hereby accept the Option to subscribe for [
] Shares at the Subscription Price of S$[
per Share. I enclose cash for S$1 in payment for the purchase of the Option.
3.
I acknowledge that the Option shall be exercisable at the times and in respect of the number of
Shares speci®ed in the Vesting Schedule attached to the Letter of Offer (if any) and on such
conditions (if any) applicable to the Option.
4.
I understand that I am not obliged to exercise the Option.
5.
I con®rm that my acceptance of the Option will not result in the contravention of any applicable
law or regulation in relation to the ownership of shares in the Company or options to subscribe
for such shares.
6.
I agree to keep all information relating to the grant of the Option to me con®dential.
7.
I further acknowledge that you have not made any representation to induce me to accept the
Option and that the terms of the Letter of Offer and this Acceptance Form constitute the entire
agreement between us relating to the offer of the Option.
160
]
Please print in block letters
Name in full
:
Designation
:
Address
:
Nationality
:
NRIC/Passport(1) No.
:
Signature
:
Date
:
Note:±
(1) Delete accordingly.
161
SCHEDULE 3
FORM OF EXERCISE NOTICE
To:
The Committee,
Digiland Share Option Plan,
14, Sungei Kadut Avenue,
Singapore 729650.
Serial No.:
Date:
Dear Sirs,
Exercise Notice
Date of Grant of Option
:
Subscription Price
:
Number of Shares comprised in Option
:
Number of Shares previously allotted
:
Outstanding balance of Shares to be allotted
:
Number of Shares now to be subscribed
:
1.
Pursuant to your Letter of Offer dated [
] and my acceptance thereof, I hereby exercise the
Option to subscribe for [
] Shares at the Subscription Price of S$[
] per Share. Terms
de®ned in the Plan shall have the same meaning when used in this Exercise Notice.
2.
I enclose a cheque/cashier's order/banker's draft/postal order(1) no. [
Subscription Cost of S$[
].
3.
I agree to subscribe for the Shares subject to the terms of the Letter of Offer, the Plan and the
Memorandum and Articles of Association of the Company.
4.
I declare that I am subscribing for the Shares for myself and not as a nominee for any other
person.
5.
I request the Company to allot and issue the Shares in the name of The Central Depository (Pte)
Limited (``CDP'') for credit of my Securities Account with CDP/Sub-Account with the Depository
Agent/CPF investment account with my Agent Bank(1) speci®ed below and I hereby agree to
bear such fees or other charges as may be imposed by CDP in respect thereof.
162
] for the Aggregate
Please print in block letters
Name in full
:
Designation
:
Address
:
Nationality
:
NRIC/Passport(1) No.
:
Direct Securities Account No.
:
OR
Sub-Account No.
:
Name of Depository Agent
:
OR
CPF Investment Account No.
:
Name of Agent Bank
:
Signature
:
Date
:
Note:±
(1) Delete accordingly
163
This page has been intentionally left blank.
SNP SPrint Pte Ltd 6124861
13,000
Resellers
30
Distribution
Centres
9
Countries &
Territories

DIGILAND INTERNATIONAL LIMITED

Transcription

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